In re MAYER, 108 F. 599

WOODS, Circuit Judge, after making tlie foregoing statement, delivered the opinion of the court. It is not clear that the motion to dismiss the petition because the petitioner is in contempt of the district court should not be sustained. The question is whether an adjudged bankrupt shall ,be heard to assert a claim for a homestead, of undetermined location or dimensions, while in contempt* of an order of the court requiring him to pay to the trustee a sum of money which he is wrongfully withholding, and when it appears that he had not included in his.

schedule other moneys and property to a large amount, but had made fraudulent transfers thereof, and with his wife and family had abandoned their residence in the alleged homestead and had left the country. The last clause of

section 47 of the bankruptcy act malíes it the duty of trustees to “set apart the bankrupt’s exemptions and report the items and estimated value thereof to the court, as soon as practicable after their appraisement”; and by

section 2 of the act the courts of bankruptcy are given jurisdiction to “determine all claims of bankrupts to their exemptions.” By

section 6 the exemptions allowable are those prescribed by the state laws in force at the time of filing the petition in the state wherein the bankrupt has had the required domicile. In this instance the trustee refused to, recognize the homestead right Claimed, and the proceedings detailed in the statement of facts followed. While the last proceeding before the referee was treated by him as being “in the matter of the petition of Oliver 0.

Duller, trustee, to take possession of and to quiet title to premises claimed as a homestead,” it was evidently not an independent proceeding, to which in any proper sense the bankrupt should be regarded as standing in the attitude of a defendant. It was, in fact, a part of the proceeding instituted by himself when he inserted in his

schedule the claim for a homestead exemption. Before the referee and before the district court his position was essentially that of a claimant or petitioner asserting a right,, which the trustee, representing the estate, denied; and the order of February 8th did not change the relation of the parties to the question or to the proceedings. That order, it would seem, was interlocutory only. It did not in terms define the extent or boundaries of the homestead to be set apart.

If it had, there would have been no need for further action on the part of the referee or trustee; but that such further action was contemplated, and in fact was necessary, the opinion and order of the court read together leave no room to doubt.

There is. nothing in the opinion fixing the point to which the dividing line between the north and south halves of the premises should be extended except the words “to the rear of the unoccupied portion of the lot,” and, the frame dwelling house being on the west end of the lot, it was yet to be determined how much of the intervening space was or should be deemed to be appurtenant to or occupied by that house.

The opinion of the court quite appropriately directed that its order be certified to the referee, in response to whose certified question the ruling was made, to the end, it is clear, that under the referee’s order, conforming, of course, to the order of the court, the trustee, on whom alone the slalute imposes such duly, should proceed to set apart the homestead as directed.

If, however, the order should be regarded as final in its character, it was nevertheless subject to be set aside, either expressly or by implication from an inconsistent order of the court, whether acting upon its own motion or at the instance of a party, so long, at least, as the term of court at which it was entered had not gone by, as it had not when the petition of the trustee was filed; and with knowledge of the facts thereby brought to its attention the court would have been grossly derelict if it had allowed the order to stand.

When the homestead right is uncertain and so complicated with other property that the court must be asked to establish and define it, and it is made to appear, while the matter is under consideration or has not passed beyond the control of the court, that the bankrupt is withholding and concealing other property which ought to hare been scheduled and turned over to the trustee, and is evading an order of the court requiring him to pay over a specified sum, is it to be said that the court may not pause, but must proceed to determine as an independent matter the question of the bankrupt’s right to a homestead, even though it be apparent that he is withholding fraudulently money and property probably of greater value than the properly claimed to be exempt?

Under the Wisconsin statute the price of a homestead may be held as exempt for two years, if it be done for the purpose of purchasing therewith another homestead.

If in such case there should be an adjudication of bankruptcy, and the trusl.ee should obtain possession of money which the bankrupt claimed and was entitled to claim as exempt because of its being the proceeds of the sale of a homestead, ought the court, without inquiry into the facts, to order the trustee to surrender the money, notwithstanding the bankrupt, in willful disobedience of an order of the court, is alleged to be withholding and concealing other money and property to which the trustee is justly entitled? The question ought to answer itself (Pratt v. Burr [C. C.] 19 Fed.

Cas. 1248), and there is no good reason for saying that a homestead unsold is any more sacred than the price of it when held for reinvestment: in another refuge for the family. If in this case no one hut the bankrupt himself were concerned, there could be no injustice in dismissing his petition to this court because of his contempt of the orders of the district court; and the fact that he has a wife and children does not seem to affect the legal aspect of the proposition.

During the life of the husband, in whom is the title, the wife has by virtue of the homestead laws of Wisconsin no vested interest in the home, but simply control over the husband’s right: to convey or mortgage it, and even with that power she cannot hinder a change of domicile, upon which, the homestead right ceasing, the husband’s disability to convey or mortgage the land will also cease, except: that, irrespective of the law of homestead, a conveyance without her signature and acknowledgment will be subject to her inchoate light of dower. It was so declared in Godfrey v. Thornton, 46 Wis. 677, 683, 1 N.

W. 362. We. however, are not called upon now to consider what would be the effect if a wife, refusing to follow her bus-band in a change of domicile, should continue to reside in the honr - stead.

The court below, therefore, would have been justified in striking out the answer, or, at least, in refusing to hear the bankrupt’s attorneys in response to the petition of' the trustee, so long as he persisted in disobedience of the order to pay over money, and on that ground might well have set aside summarily the order directing the homestead to be set apart; but whether for that reason alone it would have been proper to declare the right of homestead forfeited and the trustee vested with absolute title may be questionable.

With the order set aside or disregarded, the original question of the homestead right was open again for investigation; each party, unless precluded by being in contempt, having the privilege of introducing further proofs. So long as there had not been a final adjudication, or the term of court had not passed at which the adjudication was had, the bankrupt, though he had fied the country, was constructively in court and bound to take cognizance of what should be done.

His absence could not deprive the court of the power to proceed to a final conclusion, though the fact and circumstances of his going and his family following him abroad afforded potent evidence that his claim for a homestead in any part of the property other than the frame dwelling, in which he had lived until shortly before the adjudication, was fraudulent in its origin, and that whatever such right he had had in the frame dwelling he-had forfeited by his fraudulent attempt, in anticipation of bankruptcy, to obtain a larger holding.

His attempt to include the frame dwelling in the homestead the district judge declared “rapacious.” . His attitude and conduct as finally revealed were consciously fraudulent and lawless. If not strictly an equity court, a bankruptcy court proceeds on equitable principles and is not bound to lend itself to the establishment of an undetermined claim for exemption,, even though asserted in the sacred name of homestead, in favor of a fraudulent claimant, who stands in confessed defiance of the court and of the law under which the claim is asserted. “The homestead,” said Judge Bond in Re Dillard (C. C.) 7 Fed.

Cas. 703, “was'a bounty to unfortunate, but honest, debtors. It was not intended for the benefit of fraudulent bankrupts.” “A party,” said Judge Miller in Pratt v. Burr, supra, “cannot turn that which is granted him for the comfort of himself and family into an instrument of fraud.’’ The case, however, is not before us on appeal to be reviewed upon its merits; and, passing the motion to dismiss, we are called upon to consider only the questions of law presented by the petition.

As formulated, the questions proposed seem to be of law purely, but they include assumptions of fact not established by the record, and for that reason, perhaps, ought not to be considered. They assume the fact, which might well have been found to the contrary, that at the date of the adjudication of bankruptcy the particular property now in question was occupied by the bankrupt (in good faith) as a homestead; and, contrary to the indisputable fact, they assume that in the bankruptcy proceedings that property had been (finally and irrevocably) adjudged to be such homestead.

Enough has been said already to show that there had been no sncn adjudication, and that, even conceding the ultimate proposition sought to be established, that by the bankruptcy law the title to exempt property remains in the bankrupt, and in no event can go to the trustee, the final order of the court may have been made, or at least may be justified, on the ground that a homestead right in the north half of the double building had never been established, and that the homestead in the frame dwelling had been abandoned before the date of the adjudication.

By his own testimony he “never abandoned the frame building as a homestead,” and, that being so, he could not have acquired a homestead in the other building. Jarvais v. Moe, supra. But, assuming the question to be before us in proper form, is it true, by (be letter of the statute, that in no case and in no sense does the title to exempt property vest in the trustee? If so, and if there can be no escape by construction, then of this statute more than any other known to us the spirit is sacrificed to the letter. Illustrations may readily be suggested.

When the claim is for the exemption of property which must be separated from other property of the bankrupt, until the right of exemption shall have been determined and the particular parts or parcels to be exempted designated, there can certainly be no impropriety in treating, and in order to reach just results in supposable cases it will be found necessary to treat, the title as having been sub modo in the trustee. If, for instance, as in Re Friedrich, 40 C. C.

A. 378, 100 Fed. 284, the property consists of a stock of goods in trade, in which there is a disputed or a conceded right of exemption to a certain amount in value, is it not clear that the ti fie to the entire stock must be deemed to pass to the trustee, subject to the claim for- exemption, and that, when afterwards the exemption shall be allowed in specific articles, the title of the trustee to those articles will cease and to the other articles become absolute, and by relation be considered to ha ve been such from the date of the adjudication of bankruptcy?

In all such cases, whether the property be personal or real, the claim for exemption, until determined and defined by the trustee or by the court, is not a title to specific property or articles, but is rather a limitation or charge imposed by the statute upon the title of the trustee. This view certainly may well be applied to a claim for a homestead right which has not been determined by the judgment of a competent court, and which is asserted over more property than can be included in it.

Just what part, if any, of the property claimed in this instance should have been a-ppor-1 ioned and set off as a homestead, whether one part or another, or the whole, was matter for the court to determine, and, until that had been finally settled, it was not and could not be known what part should be exempted and what part should go (by relation had gone) absolutely to the trustee.

After the entry of the order of February 8th it was in the power of the court, on motion or sua sponte, to change the order, so as to exempt the south instead of the north half of the double building, or the frame building instead of either; and, if that had been done, what then should be said of the title, either of the bankrupt or the trustee? That it shifted with the changing orders? Or, rather, that from the date of the adjudication the trustee held title to the entire property, subject to such exemption as finally should he awarded?

During the ten days from the adjudication to the filing of the schedule, in which the exemption was firsj. asserted, where was the .title?

If during that time the bankrupt had died intestate and without widow and issue, the homestead would have gone “according to the law of descent” in Wisconsin, but subject to the debts and liabilities of the deceased; and yet, if the title was in no sense in the trustee, he would have been powerless to deal with the property, and if he had proceeded to dispose of the entire property of which the homestead was a part, and to use the proceeds in discharge of the debts of the bankrupt, the sale of the homestead, it would seem, must have been subject, at any time within the statute of limitations, to be set aside as invalid or void at the suit of those entitled thereto by law.

Or suppose, again, that a bankrupt, having an undisputed .fight of exemption in a homestead, should not assert the right, and pending the proceedings should abandon the property as a residence, either with or without a purpose that the trustee should take possession and dispose of the property as a part of the bankrupt estate.' What, on either supposition, would be the trustee’s right in or power over the property? Again, let it be supposed that Mayer had sold the entire property which he claimed as a hdmestead, and at the date of the adjudication had had the money received therefor on deposit.

Por as much as two years the right of exemption would have extended to the proceeds of the homestead, if “held with the intention to procure another homestead therewith.”' To determine, upon that supposition, the right of the bankrupt to claim a part or the whole of the deposit as exempt would have involved determining— First, whether there was a homestead right in the property before the sale; second, what part (if only a part) of the entire price had been received for or was fairly attributable to the homestead right; and, finally, whether to the extent derived from the homestead the deposit had been held with the intention of procuring therewith another homestead.

Until those questions had been solved in whom would have been the title to the deposit? And if for the purpose of greater safety or for any reason it had become desirable or necessary to withdraw the deposit, by whom could the withdrawal have been effected? Certainly not by the bankrupt, and if not by the trustee, then onD by the consent of both parties, unless upon an order of court, certain to be too late for supposable emergencies. All such difficulties will disappear before the proposition, if conceded just as it is expressed in the seventieth

section of the statute: “The trustee * * * and his successor or successors * * * shall in turn he vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it (the title) is to property which is exempt, to all (1) documents relating to his property; * * * (5) property which prior to the filing of the petition he could by any moans have transferred, or which might have been levied upon and sold under judicial process against him.” In Wisconsin a man may have a homestead, though he he without wife or child, and in such case, of course, may convey or otherwise dispose of the property at will.

If he has a wife, he may convey the homestead, if the deed be signed, though not acknowledged, by her; and, as already stated, lie may, by changing his domicile, acquire the uncontrolled power to mortgage or convey the property without the wife’s consent, subject only to her inchoate right oí dower (Godfrey v.

Thornton, supra); and a conveyance of a homestead without the wife’s signa hire, in which was reserved to the grantor “the sole, free, and absolute use and control” of the property “so long as he and his wife, or either of them, may live,” lias "been declared valid, though without such reservation the conveyance would have been void. This was the ruling in Ferguson v. Mason, 60 Wis. 377, 19 N. W. 420; one of the judges, however, being of opinion (and it. was so held in Pratt v.

Burr, supra) that such conveyance, though without: reservation, would be void only in so far as it purported to cover the homestead right. See,"also, Moore v. Smead, 89 Wis. 558, 62 N. W. 426; Schoffen v. Landauer, 60 Wis. 334, 19 N. W. 95; Jarvais v. Moe, 38 Wis. 440.

The bankrupt thus having power by his individual act to convey the property which he possesses as a homestead, though he have a wife, if he expressly reserves the homestead right for the benefit of both, and absolutely if he have no wife, it follows, even within the letter of the statute, that the title to such property, subject to the right of exemption, — that is to say, in so far as the properly is not exempt, — passes to the trustee, and is vested in him by opera-don of law, subject (if there be a wife) to the same reserva! ion, supplied by legal intendment, which in a conveyance by the owner must have been expressed.

In Re Woodruff (D. C.) 96 Fed. 317, it was held that the bankruptcy court had jurisdiction to enforce, against property set apart by the trustee to the bankrupt as exempt under the laws of the state, the rights of creditors who hold notes or other obligations of [he bankrupt waiving exemptions, though (he obligations had not been reduced to judgment and did not otherwise constitute a specific lien upon the property; and in Re Sisler (D. C.) 96 Fed. 402, a like ruling was made. Both cases proceed on the theory of title in (.he trustee, though for the benefit of some only of the creditors.

In the first, after distinguishing the opinion of Justice Bradley in Re Bass (C. C.) 2 Fed. Cas. 1004, the judge, in respect to the powers of the bankruptcy court and the spirit in which the statute is to be construed, said: •‘The court of bankruptcy, as we have seen, is now given the express power •to determine all claims of bankrupts to their exemptions.’ Now, what .does this language import?

If the court has the. power to determine that the bankrupt is entitled to his exemption as against the creditors, it certainly has the correlative power to determine the right of the creditor to attack the exemption upon any legal ground. This language is not a limitation upon the power of the court, to he strictly construed, hut it is a grant of jurisdiction. which must be beneficially construed to carry out its purpose.

The language must have'a reasonable construction, and with the express grant of power to determine all claims of the bankrupt to his exemption diere seems clearly to go the power to determine that the bankrupt has no claim to exemption in favor of particular creditors, because under the constitution of this state as to them he has solemnly renounced and waived it.” See, also, In re Wells (D. C.) 105 Fed. 762. It was held by the court of appeals in the Ninth circuit, in Re Scheldt (C. C. A.) 104 Fed. 870, contrary to the decision of the court of appeals for the Eighth circuit in Steele v. Buel (C. C.

A.) 104 Fed. 968, that .under clause 5 of

section 70a, insurance policies, though exempt by the laws of the state from execution, vest in the trustee; and under either decision such policies, if not exempt by the state laws from execution, pass to the trustee as assets, subject to the option of the bankrupt to pay or secure to the trustee the surrender value when ascertained.

The intention of this statute is, without doubt, that the creditors shall have all the estate of a bankrupt which is not exempt, and that the bankrupt shall have the exemptions' allowed by the law of his domicile, determined by relation to the date of .adjudication, “separating the past and the future”; but it does not follow, and may not reasonably be said to have been the intention of the statute, that a bankrupt, while concealing or withholding property or money which the law requires him to surrender to the trustee, may insist that the latter shall surrender to him other moneys or like property which the same law permits him to claim as exempt.

Ordinarily and in a direct sense it is true, also, that “all after-acquired property goes to the bankrupt and with that the trustee has nothing to do”; but, again, it does not follow that with such property .or its proceeds a bankrupt may not be compelled, at the end of an execution or otherwise, to make good to- the trustee whatever of property or money he had failed to

schedule and turn over. Neither in excuse nor mitigation of his disobedience of the court’s order would Mayer have been permitted to show, if he could, that before notice of the motion to show cause he had expended or lost the particular money ordered to be paid over, and was for that reason unable to pay it except with after-acquired means. -The statute certainly does not require or permit that upon such a plea he should be acquitted of contempt or relieved of the order of .commitment. The rights and duties created by the statute, in some measure at least, must be correlative.

Oases which arose under the act of 1867 can have little bearing.

That act required a conveyance by the register to the assignee of “all the estate, real and personal, of the bankrupt,’’ but, besides providing that there should be excepted from, the conveyance the exemptions allowed by the laws of the state in which the bankrupt had his domicile, contained the further provision that “in no case shall the property hereby excepted pass to the assignee or the title of the bankrupt thereto be impaired or affected by any of the provisions of this act.” This language is perhaps too explicit to admit of construction, and yet cases are supposable in which it would have been impossible to say that under that act the title to real estate in which the bankrupt had a homestead did not vest in the assignee.

An illustration is afforded by the case of Cox v. Wilder, 2 Dill. 45, 6 Fed.

Cas. 684, where it appears that by the law of Missouri the head of a family wa's allowed exemption from execution in “any of his or her real estate, not exceeding (one hundred and sixty acres in farming land or one lot in a town or city) in value one thousand dollars at the date of such exemption, to be held and enjdyed by such party as a homestead”; and it was further provided that where the real estate so owned was of greater value than the amount allowed to be exempted as a homestead, and was not susceptible of division, the entire property might be sold on execution, the officer paying over to .the defendant in the execution the amount of the exemption.

Bimilar cases arising under the laws of Vermont and Georgia, respectively, are to be found in Re Beede (D. C.) 3 Red. Cas. 62, and in Re Brown (D. C.) a Fed. Cas. 334. In Re Friend (C. C.) 9 Fed. Cas. 821, the trustee wrongfully sold specific articles of property which the bankrupt had claimed as exempt, and Justice Bradley, instead of treating the sale as void, held the bankrupt entitled to the proceeds of the sale; and in Re Jones (C. C.) 13 Fed. Cas. 931, Judge Dillon held that a right of exemption, denied by the assignee, might be enforced against the proceeds of sale in the hands of the court.

These rulings necessarily imply the power of the assignee, under the act of 1867, to sell exempt property and give a good title (.hereto, if the bankrupt consents to look to tbe proceeds, and this likewise implies that the bankrupt under that act could waive tlie exemption in favor of the assignee, claiming the proceeds of the sale of the properly or not as he should choose; and that (under the act of 1841) there might be such a waiver even of a homestead right under the law of Wisconsin was hold by Judge Miller in Pratt v. Burr, supra, in Re Watson (D. C.) 29 Fed.

Cas. 421, upon objection being made that the real estate set off by the assignee to the bankrupt as a homestead was of greater value than the amount limited by law, the court ordered a sale of the property subject to tlie rights of the bankrupt in the proceeds, if a sale could be made for more than the lawful exemption In Re Kean (D. C.) 14 Fed.

Cas. 157, it was held that a discharged bankrupt could not be allowed to claim a further exemption; and this, again, carries the implication that the property, which before his discharge he might lawfully have claimed as exempt, went under the act of 1867 to the trustee to he disposed of for the benefit of creditors. In other words, the failure to claim the exemption before discharge was a waiver, which inured directly to the benefit of creditors; and if a right of exemption may be waived voluntarily, then why not by

an act of fraud inconsistent with the right? These decisions demonstrate the practical impossibility of denying to the assignee or trustee the power in frequent cases to sell and to transfer the title to exempt property, and it is therefore a fair inference that in the framing of the present act there was an intentional omission of the provision, so industriously reiterated in tlie act of 1867, that “in no case” should exempt property pass to tlie trustee. The language of the act of 1898 Is not so explicit and clear as to forbid construction.

The trustee is vested by operation of law with the title of the bankrupt, “except in so far as it is to property which is exempt.” It certainly does no violence to this expression to treat it as meaning that the trustee is clothed with title to the property of the bankrupt in so far as the property is not exempt; and, the supreme court of Wisconsin having decided that the owner of real estate held as a homestead, though he have a wife, may convey the fee of the land if he reserves the homestead right for himself and wife, our holding in this, case, that the title passed sub modo to the trustee, is in literal accord with the fifth clause of

section 70a, even though treated as limited by the words, “except in so far as it is to property which is exempt.” Of course, the title vested in the trustee, whatever it be, must always be subjected to such exemption as the court shall finally determine in favor of the bankrupt, his widow and children, or his grantee, if pending, the determination he should convey the homestead right to another;' but if, as in this case, while the matter is undetermined, or is yet within the power of the court, the bankrupt and his wife abandon the property as-a residence, without having transferred' the homestead right to another (who can assert the rights of a good-faith purchaser), our conclusion is that the abandonment inures directly to the benefit of ’the creditors, and that, as if the claim of exemption had never been made, or had never-had true foundation, the title of the-trustee becomes absolute as of the date of the adjudication of bankruptcy.

We find in the questions propounded no reason for disturbing the order entered below.