Bashinski v. Talbott

SHELBY, Circuit Judge. Ellis M. Talbott, the respondent, was the owner of a certain judgment against R. A. Lancaster. Before the proceedings in bankruptcy he made the following transfer of the judgment: “For value received, I hereby transfer and assign to L. S. Worsham, trustee, all my interest in a judgment obtained in my favor in the case of Ellis M. Talbott v. R. A. Lancaster, Receiver, in the United States circuit court for the Western division of the Southern district of Georgia.” On the 23d of August, 1900, before any collection had been made on this judgment, a petition in bankruptcy was filed against Talbott, and on January 21, 1901, he was adjudged a bankrupt. On February 1, 1902, Talbott (he had been absent from the state of Georgia [338] for several months) filed schedules and asserted a claim 'to exemptions. The trustee in bankruptcy set apart to him as exempt several articles, valued at $37.50, and $1,562.50 in money, the total exemptions being $1,600. The creditors filed objections to this allowance of exemptions. The objections were overruled by the referee, and the referee’s ruling was affirmed by the district court.' 116 Fed. 417. The money which was allowed the bankrupt as exempt was collected on the Lancaster judgment, which had been assigned to Worsham. The case is brought here on petition to revise the decree of the district court, and it is contended that the court erred in allowing the exemptions, because the bankrupt had transferred, prior to bankruptcy, the judgment on which the money set apart to him was collected. It appears from the record that no delivery of the instrument assigning the judgment was ever made to Worsham .as assignee of the judgment. The judgment was collected, and the proceeds remained for some time in the hands of R. C. Jordan, the attorney of record for Talbott in the court where the judgment was obtained. Worsham, the assignee of the judgment, never made any effort to reduce the money to his possession. After the proceedings in bankruptcy against Talbott had begun, Jordan, under direction of the court, paid the proceeds of the judgment, less his fee, to the trustee in bankruptcy. Jordan at the time he was directed to pay the money to the trustee held the same as attorney for Talbott. The following is the statute under which the exemption was claimed and allowed: “There shall be exempt from levy and sale, by virtue of any process whatever, under the laws of this state, except as hereinafter excepted, of the property of every head of a family, or guardian, or trustee of a family of minor children, or every aged or infirm person, or person having the care and support of dependent females of any age who is not the head of a family, realty or personalty, or both, to the value in the aggregate of sixteen hundred dollars. And no court or ministerial officer of this state shall ever have jurisdiction or authority to enforce any judgment, execution or decree against the property set apart for such purpose, including such improvements as may be made thereon from time to time, except for taxes for the purchase money of the same, for labor done thereon, for material furnished therefor, or for the removal of encumbrances thereon.” 2 Code Ga. 1895, § 2827. This statute was in force when the petition in bankruptcy was filed, and it therefore governs the amount of- exemptions to which the bankrupt is entitled. Section 6, Bankr. Act. It is contended by-the petitioners that the effect of the.assignment of the judgment is to deprive the bankrupt of any right of exemption in the money collected on it, and that this contention is supported by the supreme court of Georgia in McDowell v. McMurria, 107 Ga. 812, 33 S. E. 709, 73 Am. St. Rep. 155. In that case it was decided that a deed made to defraud creditors, though void as to them, is good between the grantor and grantee, and that the former, after executing such’ deed, has no title to the property thereby conveyed, and therefore cannot have the same set apart and exempted as a homestead under the laws of Georgia. “In attempting to place his property beyond the reach of his creditors,” said the court, “he has placed his exemption beyond his own reach.” That case was one in which the grantor was guilty of actual fraud. He conveyed his [339] property to a trustee for the benefit of his children, with the-intent and purpose to hinder, delay, and defraud his creditors. The creditors, by suit, sought to avoid the conveyance and condemn the property to the payment of their claims. This appears clearly from the record, although the court said it was “very meager and imperfect.” The main point involved in the case was the construction of a decree previously rendered. The decree had adjudged that a certain deed, it having been made to defraud creditors, was null and void, and that it be delivered into court and canceled. The court held that, when nothing more appears, such decree will be construed as declaring the deed to be null and void as to the complaining creditors, and not as adjudicating the invalidity of the instrument as between the parties thereto. This was held on the application of the familiar doctrine that a fraudulent deed, although void as to creditors of the grantor, is good as against the grantor, his heirs, executors, and administrators and parties claiming under the grantor. But is that principle applicable here to defeat the bankrupt’s claim of exemptions? Here there has been no suit against the assignee of the judgment to avoid its transfer. The transfer of the judgment to Worsham was not made to defraud creditors. Its purpose was, as shown by the record, that Worsham should collect the judgment as trustee or agent for Talbott, and pay the proceeds to Talbott’s creditors. It does not appear that Worsham ever took any steps to obtain the money collected on the judgment. He asserts no claim to the money. No claim is asserted in this case under the transfer of the judgment. The proceeds of the judgment having come into the hands of the trustee in bankruptcy as the property of the bankrupt, he clearly holds them for administration and distribution under the bankruptcy law, and not under the assignment of the judgment. It would seem to us unjust and contradictory to hold that the funds were the bankrupt’s for administration and distribution among the creditors under the bankruptcy law, and yet that the bankrupt was not entitled to exemptions allowed by the same law. Can it be his money under the section relating to its distribution among his creditors, but not his money under the section allowing exemptions ? This is not a case in which the trustee in bankruptcy has sued for and recovered property which had been fraudulently transferred by the bankrupt. In such case it might be contended that a plaintiff who attacked the transfer in equity obtained a lien that would not be displaced by a claim of exemptions asserted after the transfer was avoided by decree. Here no suit has been brought against Worsham, the assignee of the judgment. He has neither held nor asserted any adverse claim against the petitioning creditors.- The case is wholly unlike McDowell v. McMurria, supra. In Pendleton v. Hooper, 87 Ga. 108, 13 S. E. 313, 27 Am. St. Rep. 227, it was held that the claim to exemption was not defeated by the fact that the claimant had parted with the title to his land by a deed of gift, he not having parted with the possession. In that case, Bleckley, C. J., speaking for the court, asked the pertinent question: “How, then, can the land be consistently treated as the property of the debtor for the purpose of subjecting it to sale, and not so treated [340] for the purpose of exempting it?” See, also, Whitehead v. Mundy, 91 Ga. 198, 17 S. E. 287. There are other cases which tend to sustain our conclusion, but we will not lengthen this opinion by quoting or discussing them. In re Tollett, 46 C. C. A. 11, 106 Fed. 866, 54 L. R. A. 222; In re Falconer, 49 C. C. A. 50, 110 Fed. 111; Rice v. Nolan, 33 Kan. 28, 33, 5 Pac. 437. The statute allows the exemption to the head of a family. It was clearly the intention of the legislature tO' allow it as a support or benefit to the family of a distressed or insolvent debtor. The statute should be liberally construed to enforce the legislative intent. The courts should be reluctant to deprive the debtor’s family of the benefit of the statute, on account of an act of the debtor which does not clearly demand such deprivation. We would, of course, follow the decisions of the supreme court of Georgia in construing the exemption statutes of that state. We find no decision of that court directly applicable to the state of facts presented in this record, but we think the principles announced in some of the cases we have cited tend to sustain our conclusion. The decree of the district court is affirmed.