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He alone was possessed of the information upon the subject. It was his duty, in setting up a claim to a homestead, to show by clear and conclusive proof that at the time he built the house upon the property he was in a solvent condition, and able to satisfy all the claims against him, before he could take money from his business for the purpose of securing a homestead. The fair deduction from all the evidence in this case tends clearly to prove that at the time he commenced the erection of this house he was in a failing condition, if not insolvent. He built this house upon a lot owned by his wife, and afterwards had it conveyed to himself in order that he might have it set apart as a homestead. This is a most potential fact to show that he was shaping his course to protect himself as far as possible from the consequence of bankruptcy, which the evidence tends to show was imminent at that time, for on the 25th day of October following a petition of involuntary bankruptcy was filed against him, and in less than a month he was adjudicated a bankrupt. We deem it unnecessary to discuss the evidence in detail filed in this case, but content ourselves with the conclusions that we have reached based upon all the evidence, more particularly on the evidence of the bankrupt himself.
In the view that we take of this case, we reach the conclusion that the bankrupt court has the power to dispose of this question upon the issue raised by the pleadings and the evidence as they exist in this record, and that upon the evidence and pleadings the bankrupt has no right to have the property that he claims as a homestead set aside, for the reason that we are of the opinion that he had no money that he could justly call his own at the time when he commenced to erect the building upon the lot of his wife, which was subsequently conveyed to him, as we think, for the purpose of claiming it as a homestead. Exceptions were also taken to the action of the trustee in setting apart $500 as personal property, for the reason that $425 was money which was set apart as exempted property under the law. It is true that the trustee did not set apart specific articles of property as exempt, but it appears that there was an understanding between the trustee and the bankrupt that the entire stock of goods should be sold, and that the bankrupt should receive his exemption of personal property in cash. The trustee deemed it to be for the best interest of all the creditors to do so, and the referee approved the action of the trustee in this respect, and directed that the entire stock of goods should be sold. To this action of the referee there was an exception taken, which exception raised an issue as to the right of the trustee to sell the entire stock of goods, and to give the bankrupt $500 in cash, the amount of his exemption in personal property. This action of the referee was not approved by the court, the court holding that only the $75, of the $500, could be set aside, and overruled the action of the referee in setting aside the $425 in cash as a personal exemption. In this conclusion of the court below we concur, for the reason that under the provisions of the constitution of the state of South Carolina money derived from the sale of merchandise on
which purchase money is still due cannot be set aside as an exemption, and it would be unjust to the creditors to do so.
In the view that we take of this case it is unnecessary to pass upon the other exceptions, as the ones we have passed upon necessarily dispose of the two exemptions claimed by the bankrupt. For the reasons assigned, we are of the opinion that so much of the judgment of the court below as holds that the bankrupt court has not the power to dispose of the question of the homestead exemption be reversed. This court holds that it has such power, but is of the opinion that the bankrupt is not entitled, under the pleadings and evidence in this case, to the homestead exemption of the house and lot claimed by the bankrupt in Schedule B. The court is further of the opinion that the exception to the judgment of the court below as to the personal exemption of $500 should be overruled, this court holding that the allowance of $75 as a personal exemption, and the disallowance of $425, is correct.
For the reasons assigned, we are of the opinion that the judgment. of the court below be reversed, and this cause remanded to that court, with direction to conform its action to the judgment of this court. Reversed.
(113 Fed. 141.)
In re HOLDEN et al.
(Circuit Court of Appeals, Ninth Circuit. January 16, 1902.) BANKRUPTCY-LIFE INSURANCE-EXEMPTION.
A husband and his wife were each adjudged bankrupt, and the same trustee appointed for both. His life was insured, the policies payable to her, but provided that, if she should not survive him, payment should be made to his executors, administrators, and assigns. They claimed the policies as exempt under Laws Wash. 1895, p. 336, providing that the proceeds or values of all life insurance shall be exempt from all liabil ity for any debt, and Bankr. Act, § 6, providing that the act shall not affect the allowance to bankrupts of the exemptions prescribed by the state laws. Held, that such section 6 does not control the provisions of section 70a, that when the bankrupt has an insurance policy which has a cash surrender value, payable to himself, his estate, or personal representatives, the policy shall pass to the trustee as assets, unless the bankrupt pays such value to the trustee; and, as the wife could not hold the policies payable to her, nor the husband hold them when payable to his personal representatives in the event of her prior death, the policies passed to the trustee.
Petition for Revision of Proceedings of the District Court of the United States for the Northern Division of the District of Washington.
P. P. Carroll and John E. Carroll, for bankrupts.
Before MCKENNA, Circuit Justice, and GILBERT and ROSS, Circuit Judges.
MCKENNA, Circuit Justice. This is a petition filed under section 24b of the bankruptcy law of 1898 to review an order of the district court for the district of Washington, Northern division,
made and entered in the above-entitled cause. The said D. L. Holden and Lizzie Holden were separately proceeded against in bankruptcy by their creditors. The causes were consolidated by consent, and "one and the same answer" filed to the petitions. Subsequently it was adjudged that the "respondents and each of them are bankrupts within the true intent and meaning of the acts of congress relating to bankruptcy." The respondents then prayed exemption from the claims of creditors of two life insurance policies. The claim was disallowed by the referee, who made due report of his action to the court. The respondents filed exceptions to the report, and, after hearing, the court, by an order duly entered on the 16th of July, 1901, vacated the report, and adjudged the policies to be exempt. To review this order of the district court the present petition was filed by J. A. Stratton, the duly-appointed trustee. of the estates of said bankrupts. No answer has been filed to the petition, and the question is whether, upon the facts stated, the order of the district court should be revised.
The policies in question were issued on the 15th of June, 1894, by the Northwestern Life Insurance Company of Milwaukee, Wis., and were respectively numbered 206,383 and 303,921, and were respectively for the amounts of $5,000 and $2,000. Daniel L. Holden was the insured in both, and Lizzie Holden was the beneficiary in both, with the provision, however, that, if she should not survive him, payment should be made to his executors, administrators, and assigns. It is provided in policy No. 206,383 that it is "issued on the semitontine plan, and its tontine dividend period is twenty years," and the following is indorsed on the policy:
"Upon surrender by the insured and beneficiary of a policy for $10,000 of like number and kind dated May 2nd, 1890, this policy for $5,000 is issued at their request in lieu of one-half of the former policy; in all other respects this policy is made and accepted pursuant and subject to the application upon which the original policy was issued. A full-paid life nonparticipating policy, number 303,921, for $2,000, is issued in consideration of the surrender of one-half of the original policy."
It is alleged in the petition that the policies have a present cash surrender value, combined, of about $2,200; and it was stated on the argument that the creditors of each of the bankrupts are the same. It is provided by the laws of the state of Washington “that the proceeds or values of all life insurance shall be exempt from all liability for any debt." Laws 1895, p. 336. By section 70a of the bankrupt law of 1898 it is provided that:
"The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be 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 is to property which is exempt, to all (1) documents relating to his property; (2) interests in patents, patent rights, copyrights, and trade marks; (3) powers which he might have exercised for his own benefit, but not those which he might have exercised for some other person; (4) property transferred by him in fraud of his creditors; (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him: provided, that when any bankrupt shall have
any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise the policy shall pass to the trustee as assets; and (6) rights of action arising upon contracts or from the unlawful taking or detention of, or injury to, his property."
Section 6 of the bankrupt law is as follows:
"Exemptions of Bankrupts. (a) This act shall not affect the allowance to bankrupts of the exemptions which are prescribed by the state laws in force at the time of the filing of the petition in the state wherein they have had their domicile for the six months or the greater portion thereof immediately preceding the filing of the petition."
The effect and extent of section 6 was considered by this court in Re Scheld, 44 C. C. A. 233, 104 Fed. 870, 52 L. R. A. 188, and it was said that the purpose of the section did not pervade the whole act, but was controlled by section 70a, and that under the latter section policies of insurance payable to the bankrupt himself, his estate, or personal representatives, passed to the trustee of the estate. But we also said:
"It will be seen that the clause of section 70 above quoted does not include policies of insurance payable to the wife, children, or other kin of the bankrupt, but is limited to policies the proceeds of which are payable to the bankrupt himself, his estate, or personal representatives. The enactment does not deprive the family of a debtor of the protection which he may have secured to them in taking out policies for their benefit payable at his death, but it does prevent debtors from availing themselves of the opportunity of making investments for their own benefit in the form of endowment policies, or policies payable to themselves, and holding the same, while seeking a discharge from their debts through the bankruptcy act."
What is the character of the policies in the case at bar? Are they covered by the proviso of section 70? It will be observed that the policies were not payable to either Holden or his wife absolutely, but to her only if she survived him, and to his personal representatives if he survived her. Subject to such contingent interest in him, the policies and the money to become due under them belong to her, and it is beyond his power to transfer them to any other person, or to surrender them. In re Heilbron's Estate, 14 Wash. 536, 45 Pac. 153, 35 L. R. A. 602, citing Bank v. Hume, 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370, and other cases. Under the laws of Washington her interest in the policies became her separate property, and was assignable by her. 2 May, Ins. 3999, and cases cited. Each, therefore, has an interest in the policies, and each must be held to have an insurance policy which has a cash surrender value payable to him or her, or to his or her estate, or personal estate or personal representatives, and subject, therefore, to the provisions of section 70; in other words, passed to their respective rustees as assets of their respective estates. It may be that neither could surrender the policies without the consent of the other, but such right of surrender passed with the policies to their respective
trustees. In Steele v. Buel, 44 C. C. A. 287, 104 Fed. 968, the circuit court of appeals of the Eighth circuit has decided that the rule of exemption of section 6 pervades the whole act, and is to be read into every other section and provision of the act. The difference of opinion between that learned court and this court demonstrates the ambiguity of the bankrupt act, and, while not insensible to the necessity of harmony in the decisions of the courts of appeal, we are not disposed to depart from the ruling in Re Scheld. There is a way open to respondents for a further review of the questions involved.
It follows that the order of the district court should be revised in accordance with this opinion, and it is so ordered.
(113 Fed. 144.)
DOWNS v. UNITED STATES.
(Circuit Court of Appeals, Fourth Circuit. February 4, 1902.)
Section 5 of the tariff act of 1897, which provides that whenever any country "shall pay or bestow, directly or indirectly, any bounty or grant upon the exportation of any article or merchandise from such country" which is dutiable under the act, an additional duty equal to such bounty or grant shall be collected thereon upon its importation into the United States, is a protective measure, and is intended to cover every case where by the laws of a foreign country the exporter is given, either directly or indirectly, a pecuniary benefit from the exportation, whether by way of a direct bounty paid from the public treasury, by the remission of taxes, or by exemption from taxes which would otherwise be imposed on the article.
1. CUSTOMS DUTIES
- BOUNTY OR GRANT ON EXPOR
2. SAME-LAWS OF RUSSIA-REMISSION OF TAXES ON EXPORTED SUGAR.
The laws of Russia bestow a bounty or grant upon the exportation of so-called "free sugar," so as to work a benefit or advantage to the exporter in two ways: (1) By remitting the excise tax due upon the sugar exported, and (2) by the issuance by the government to the exporter of a certificate of exportation, which authorizes the sale in the domestic market of an equal quantity of "free reserve or free surplus" sugar without the payment of the additional tax otherwise required to be paid thereon, and which certificate is transferable and has a substantial market value; and such sugar, when imported into the United States, is subject to the additional or countervailing duty imposed by section 5 of the tariff act of 1897.
3. SAME-AUTHORITY OF SECRETARY OF TREASURY-CONCLUSIVENESS OF DECIS
Under the provision of section 5 of the tariff act of 1897, that the net amount of any bounty or grant paid or bestowed by a foreign country on the exportation of an article or merchandise "shall be from time t time ascertained, determined, and declared by the secretary of the treasury," the decision of the secretary as to such amount is conclusive, and cannot be reviewed by the courts; but the question whether a country pays or bestows such bounty or grant, where it depends up n the construction of the laws of such country, is a judicial one, and, while it is to be decided primarily by the secretary, his decision thereon is reviewable.