In re Cale

MORRIS, District Judge. The above-entitled matter came on to be heard upon the petition of the Gregory Company, a corporation under the laws of Minnesota, one of the creditors of said bankrupt/ alleging manifest error to the prejudice of said company by the referee in his findings and order, heretofore entered in said matter, allowing at $150, and disallowing to the extent of $3,000, the claim of said company, and amending the order previously made allowing said claim in full, and praying that it might be decreed that said claim be allowed in full, and that, if said company has any security therefor, proper order be made for the enforcement of such security, and for the application of the proceeds, and for further relief. Leon E. Lum, Esq., appeared on behalf of said company, and A. E. Boyeson, Esq., appeared on behalf of the trustee of said bankrupt. From the order of the referee brought up for review it appears that certain real estate of the bankrupt is exempt as a homestead against all creditors, and certain additional real estate is exempt as to debts created after the taking effect of Rev. Laws Minn. 1905, but not as to previous. debts, of which claimant’s is one; that, claimant duly recovered in the district court of the county in which said real estate'is situate-judgment for its debt, after the adjudication-in bankruptcy, and before the bankrupt’s discharge, which judgment became a lien upon a part of the debtor’s homestead, and thereafter claimant filed its claim, setting up all the facts, which claim was allowed by the referee at an amount obtained by deducting the admitted value of the part of the debtor’s homestead not exempt as to the debt from the total judgment, less the costs included in the judgment, -and interest from the date of the adjudication in bankruptcy’,. holding that the [443] judgment is security under section 57 of the bankruptcy act, and that it is enforceable only in the state courts, and not through sale by the trustee of the property. It further appears from the files that the referee has ordered the trustee to take steps in conjunction with the claimant for the enforcement of the judgment. The authorities cited by the referee sustain his conclusions. Claimant’s judgment is a lien upon certain exempt property not passing to the trustee, and should be enforced against such property' in the state court. As the personal liability of the debtor has been discharged by this court, the state court will protect the debtor by allowing execution only against such property and perpetually restraining further execution. Had answer been made to claimant’s complaint in the action in which the judgment was obtained, setting up a defense, or the adjudication in bankruptcy, this court, following decisive precedents, would have stayed the bankrupt’s discharge, if necessary, until claimant’s right to judgment should be determined in the state court. It seems to be settled, until the United States Supreme Court shall decide differently, that the right of the general creditors to the general assets will be protected, and that the creditor with an enforceable lien or claim against exempt property can collect only the deficiency from the general assets. The cases are fully cited in the referee’s memorandum. No error or prejudice is found in the ruling of the referee, and it is ordered and adjudged that the order brought up for review be affirmed, and that the claim of the Gregory Company be allowed at $150.