Adair v. Decker

Opinion by Rice, P. J., The defendant’s application in the court below was, first, to open the judgment and let him into a defense ; second, to set aside the execution and the levy made thereunder. The opinion of the learned judge below contains a full and accurate recital of the facts essential to a determination of the first branch of the defendant’s application, and we fully concur in his conclusion and in the reasons given by him therefor. We also have reached the same conclusion with regard to the second branch of the application, but differ slightly, although, perhaps, not materially, in the method by which it is reached. What we shall have to say will relate to the question of the liability of the property to execution. The judgment was entered on January 5, 1906, upon a promissory note dated October 26, 1904, containing a warrant to confess judgment and a waiver of the benefit of any exemption law; on January 10, 1906, the defendant filed his petition in the United States district court and was adjudged a bankrupt; on February 7, 1906, the trustee in bankruptcy set apart to him certain property under his claim to have the benefit of what is commonly called the $300 exemption law of Pennsylvania; on February 8, 1906, an alias fi. fa. was issued upon the judgment, by virtue of which the personal property* thus set apart to the defendant was levied upon. It does not appear that the defendant has been discharged in bankruptcy. Under the bankruptcy act of 1867 it was held that property generally exempted by the state laws from the claims of creditors was not part of the assets of the bankrupt and did not pass to the assignee, but that such property must be pursued by those having special claims against it in the proper state tribunals. Speaking of that act, Justice Bradley said: “In other words, it is made as clear as anything can be that such exempted property constitutes no part of the assets in bankruptcy. The agreement of the bankrupt in any particular case to waive the right to the exemption makes no difference. He [160] may owe other debts in regard to which no such agreement has been made. But whether so or not, it is not for the bankrupt court to inquire. .The exemption is created by the state law, and the assignee acquires no title to the exempt property. If the creditor has a claim against it, he must prosecute that claim in a court which has jurisdiction over the property, which the bankrupt court has not:” In re Bass, 8 Woods, 382. In Lockwood v. Exchange Bank of Fort Valley, 190 U. S. 294 (23 Sup. Ct. Repr. 751), the same construction was given to the act of 1898. Mr. Justice White, after quoting the foregoing remarks of Mr. Justice Bradley, said : “ The fact that the act of 1898 confers upon the court of bankruptcy authority to control exempt property in order to set it aside, and thus exclude it from the assets of the bankrupt estate to be administered, affords no just ground for holding that the court of bankruptcy must administer and distribute, as included in the assets of the estate, the very property which the act, in unambiguous language, declares shall not pass from the bankrupt or become part of the bankruptcy assets. . . . The act of 1898, instead of manifesting the purpose of congress to adopt a different rule from that which was applied, as we have seen with reference to the act of 1867, on the contrary, exhibits the intention to perpetuate the rule, since the provision of the statute to which we have referred in reason is consonant only with that hypothesis.” This is plain enough, but it will not be out of place to notice in connection with the foregoing extracts from the opinion.that the order reversing the judgment of the district court and remanding the proceeding was accompanied by direction “ to withhold the discharge of the bankrupt, if he be otherwise entitled thereto, until a reasonable time has elapsed for the excepting creditor to assert, in a state tribunal, his alleged right ” (arising out of a waiver of exemption in the note) “ to subject the exempt property to the satisfaction of his claim.” See also Sharp v. Woolslare, 25 Pa. Superior Ct. 251. It is apparent from the foregoing that the question, whether as against the plaintiff the defendant is entitled to claim the exemption notwithstanding the waiver contained in the note, is to be determined by the state law. Its determination cannot be affected by the fact that the goods claimed were set apart to the defendant in the bankruptcy proceeding, unless there is something in the state [161] law giving that fact, or the fact of the defendant’s insolvency, a conclusive effect as against the waiver. Notwithstanding regrets expressed in Firmstone v. Mack, 49 Pa. 387, that the court had not held differently at the beginning, nothing was better settled in Pennsylvania than that the right of a debtor to claim the benefit of the exemption law of 1849, was a personal privilege which could be waived. But it is claimed that the law as to waiver of the exemption has been changed by the thirty-first section of the Act of June 4,1901, P. L. 404, which provides : “ That an insolvent shall be entitled to the same exemption out of the assigned estate, as he would be had an execution been issued against him; and his right thereto shall not be denied for or by reason of the character'of any claim presented or by reason of any waiver in any contract or judgment or by reason of failure to reserve it in the deed of assignment.” It is claimed on the other hand that the act of 1901 and all of its provisions are in abeyance as to any of the persons and subjects to which the national bankruptcy act applies: Potts v. Smith Mfg. Co., 25 Pa. Superior Ct. 206. To this the appellant’s counsel reply that the national bankruptcy act permits the state court to apply the state exemption law that is in force immediately prior to the bankruptcy proceeding, which in this case was the thirty-first section of the act of 1901. The conclusive answer to the latter part of this contention is, that that section does not apply to insolvents or the estates of insolvents in general. It does not create a new exemption, but simply gives the insolvent who has taken advantage of its provisions the benefit of existing exemption laws and declares that the right of such person to the exemption shall not be denied for or by reason of a waiver in any contract or judgment. The case of Citizens’ National Bank v. Gass, 29 Pa. Superior Ct. 125, was a case where the assignor for the benefit of creditors claimed exemption out of the assigned estate, and the property claimed was regularly set apart to him under the provisions of the act of 1901. No such case is presented here. The fact that the defendant is insolvent, of course is undisputed. But if the legislature had intended to enact generally that insolvency of the debtor at the time the exemption is claimed shall defeat the waiver, we think they would have' said so in plain and unequivocal terms. Under no fair construction of-the act [162] of 1901 can it be held that this was the intention of the legislature. Therefore, the question, whether such a law could under the federal constitution be enacted by a state legislature and put in force during the existence of a national bankruptcy law, does not arise in this case. The- order is affirmed and the appeal dismissed at the costs of the appellant. '