Brooks v. Eblen

Opinion op the Court by Judge Hobson Affirming. On February 6, 1896, Rufus Eblen executed to A. Brooks bis promissory note. On October 20, 1902, Eblen purchased a tract of land upon which he resided with his family. On September 6, 1904, he was adjudged a bankrupt, and on November 12, .1904, he received a discharge in bankruptcy from all his debts. The tract of land referred to was set apart in the bankruptcy proceding as his homestead. On November 14, 1905, Brooks filed this suit in the Henderson circuit court against Eblen, in which he set up the foregoing facts and sought to subject the tract of land to his debt on the ground that it was purchased after his debt was created. Eblen relied upon his dis-' charge in bankruptcy, the circuit court sustained the defense, and Brooks appeals. As Brooks’ debt was created before the purchase [730] of the homestead, he may subject it to his debt in • this proceeding, unless he is barred of that right by the discharge of the debtor in bankruptcy. Exempt property is never in the court of bankruptcy. The title to it remains in the bankrupt. .The court of bankruptcy has no jurisdiction of it, except to set it aside to the bankrupt. All questions as to the rights of creditors to subject such property must be determined in the State courts of competent jurisdiction. Brandenburg on Bankruptcy, section 185. In the case of Lockwood v. Exchange Bank, 190 U. S. 294, 23 Sup. Ct. 751, 47 L. Ed. 1061, it was held by the United States Supreme Court that a creditor holding a note which waived the homestead could not subject the homestead in the bankruptcy proceedings, but that the bankruptcy court should postpone the discharge of the bankrupt ,for a reasonable time- to allow the creditor to institute in the State court such proceedings as were necessary to make effective the creditor’s rights; and in that ease the judgment of the circuit court was reversed, with directions to it to confirm the assignment of the homestead and to withold the discharge of the bankrupt until a reasonable time had elapsed for the excepting creditor to assert his rights in a State tribunal. We regard that case as conclusive here, as we cannot assume that the supreme court would have directed the discharge of the bankrupt to be withheld unless in its opinion the discharge of the bankrupt would have been a bar to the creditor’s proceeding in the State court. In Powers Dry Goods Co. v. Nelson, 10 N. D. 580, 88 N. W. 703, 58 L. R. A. 770, before the bankrupt was discharged, and after the proceeding in bankruptcy was begun, the creditor took out an attachment, which was levied upon exempt property. - It [731] was held that the subsequent discharge of the debtor did not discharge the lien created by the attachment, and that the property might be thereafter subjected, although the debtor had been afterwards discharged in bankruptcy. In McKenney v. Cheney, 118 Ga. 387, 45 S. E. 433, the creditor had a judgment lien upon the property, and the debtor was adjudged a bankrupt; in Bell v. Dawson Co., 120 Ga. 628, 48 S. E. 150, the creditor began his suit in the State court and had the property placed in the hands of a receiver, while the bankruptcy court had held up the debtor ’s discharge in bankruptcy. In Flint v. Chaloupa (Neb.) 111 N. W. 465, the creditor had brought his suit to set aside a fraudulent conveyance a year before the debtor was adjudged' a bankrupt. Adjudication in bankruptcy and the discharge of the debtor from his debts by the bankruptcy court do not affect the liens of creditors, except as provided by the bankrupt act. But here the creditor had no. lien when the debtor was' discharged. He simply had a debt as to which certain property was not exempt which was •exempt as to other debts created after its purchase. The question of exemptions was necessarily incidental to the existence of the debt, and, when the debt was discharged before any lien had been acquired on the property, the right to enforce the debt was lost. Judgment affirmed.