In the Matter of James George Stafos, Bankrupt-Appellant v. Laurence M. Jarvis, Trustee in Bankruptcy

477 F.2d 369
CourtCourt of Appeals for the Tenth Circuit
DecidedMay 31, 1973
Docket72-1495
StatusPublished
Cited by33 cases

This text of 477 F.2d 369 (In the Matter of James George Stafos, Bankrupt-Appellant v. Laurence M. Jarvis, Trustee in Bankruptcy) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In the Matter of James George Stafos, Bankrupt-Appellant v. Laurence M. Jarvis, Trustee in Bankruptcy, 477 F.2d 369 (10th Cir. 1973).

Opinions

BARRETT, Circuit Judge.

James George Stafos filed a voluntary petition in bankruptcy on December 24, 1970, listing unsecured debts of $612,-132.06 which he had incurred as a self-employed broker-distributor and packager of truck farming produce. He claimed as exempt homestead property, inter alia, a 13.2 acre tract of land in Wyandotte County, Kansas, acquired by him and his wife, Reva, who is not a party to this proceeding, in 1945 as joint tenants, with right of survivorship. Stafos, his wife and children have continually resided on the property since 1945. In his petition, Stafos estimated the value of the property at $35,000.00. With some minor exceptions, the property has been used as the family home and for farm crop income. Reva Stafos has been actively engaged in the farm operations on the acreage and some 60 acres of adjacent leased acreage. Stafos testified that they did about $200,000.00 “worth of business” from the farming operation in 1971.

Stafos relied upon the provisions of Article 15, § 9 of the Kansas Constitution 1 and K.S.A. § 60-2301 in support [371]*371of his contention that the entire 13.2 acres is exempt. The language contained in the above cited statute is identical to the language contained in Article 15, § 9. Until March 1, 1966, the acreage was located outside the limits of any incorporated city or town. On that date, by ordinance enacted in accordance with the then applicable law, the 13.2 ácres was annexed to the city of Kansas City, Kansas. Neither Stafos nor his wife consented to the annexation, nor is there any evidence that they were movants in respect thereto. No portion of the acreage has been platted.

The Trustee in Bankruptcy filed his report on March 4, 1971, allowing Stafos one acre to be set aside as his exempt homestead, which is to include his family home out of the total 13.2 acres, value unknown. Stafos objected and a hearing was held before the Referee in Bankruptcy on March 18,1971. One Rex Vickers, a real estate expert, testified that on that date the Stafos acreage was part of the “Muncie Industrial Area” zoned “J” for heavy industry and that considerable industry had already located in the immediate vicinity. He further testified that part of the Stafos acreage had been previously used as an office building constructed by Miller Construction Company, now occupied and used as a salvage yard at a monthly rental to Stafos of $140.00. He also testified with respect to a building used by Fouts Trucking Company. In his expert opinion “the whole area there gives the complexion of an industrial site and an industrial area; not a farm.” He would not classify the acreage as rural land, but rather as urban industrial land of a minimum value of $10,000.00 per acre. He did acknowledge that when he viewed the acreage the only major visible use being made thereof was farming. Harry Duckers, County Agricultural Agent, testified that the Stafos’ have continually farmed the land since 1948.

On January 24, 1972, the Referee filed his Order, with detailed findings and conclusions, approving the Trustee’s Report and denying Stafos’ objection. From that Order Stafos filed his petition for review before the presiding United States District Judge, Honorable Earl E. O’Connor. The Court entered its Order on May 19,1972, fully adopting the Referee’s findings and conclusions. It held that annexation reduced Stafos’ homestead to one acre. It is from that Order that this appeal is taken.

Stafos contends here, as he did below, that the federal courts should abstain because the homestead exemption issue decided in In The Matter of Stafos, Bankrupt, 354 F.Supp. 299 (D.Kan.1972), has not been decided by the Kansas state courts and that the Kansas courts are the best judges of the Kansas Constitution. We have no argument with these contentions, per se. 11 U.S. C.A. § 24 allows bankrupts the exemptions prescribed by state laws at the date of filing. In Re Cummings, 413 F.2d 1281 (10th Cir. 1969), cert. denied Sears, Roebuck & Co. v. Horton, 397 U. S. 915, 90 S.Ct. 918, 25 L.Ed.2d 95 (1970). While a state procedure in the nature of a Declaratory Judgment action was available to the Trustee after Stafos filed his homestead claim (K.S.A. § 60-1701 et seq.), this does not detract from the fact that the federal district court had exclusive jurisdiction of the subject matter. In Re Cummings, supra; Texaco, Inc. v. Pruitt, 396 F.2d 237 (10th Cir. 1968). While dictum and therefore not directly controlling, we note that the following language from Sarahas v. Fenlon, 5 Kan. 592 (1870) has not been repudiated by subsequent Kansas decisions :

[H]e [the owner] could hold but one acre as a homestead, exempt from execution, no matter whether it was worth $10 or $10,000, or whether it was used for farming purposes or [372]*372was covered all over with palatial residences. One acre is all that is exempt as a homestead under the Constitution. If he lived on that part in the city, that acre would be his homestead, and the residue of the city property, as well as his land in the country, would be subject to forced sale under execution. This is the plain letter of the Constitution; . . . 5 Kan. 592 at 596.

The decision of the federal trial court as to the law of the state where he is sitting will be accepted on appeal unless clearly erroneous. Industrial Indemnity Company v. Continental Casualty Company, 375 F.2d 183 (10th Cir. 1967). Certainly Sarahas v. Fenlon, supra, weighs heavily in favor of the trial court’s application of Kansas law. One court has held that in the absence. of ascertainable state court interpretation, the bankruptcy court must construe the statute and determine its application. Doethlaff v. Penn Mut. Life Ins. Co., 117 F.2d 582 (6th Cir. 1941), cert. denied 313 U.S. 579, 61 S.Ct. 1100, 85 L.Ed. 1536 (1941). In addition, the rights of creditors have been held in “limbo” awaiting resolution of this exemption issue for more than two years. This case does not present all of those “special circumstances” dictating the imposition of abstention- as in Kaiser Steel Corp. v. W. S. Ranch Co., 391 U.S. 593, 88 S.Ct. 1753, 20 L.Ed.2d 835 (1968); Baggett v. Bullitt, 377 U.S. 360, 84 S.Ct. 1316, 12 L.Ed.2d 377 (1964), and Meredith v. Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9 (1943).

Stafos alleges that the trial court erred, as a matter of law, in adopting the findings and conclusions of the Referee. He contends that a farming homestead is exempt from forced sale under any process of law and cannot be alienated without the joint consent of husband and wife even though it was annexed to the City without depriving him of due process of law in violation of the Fourteenth Amendment to the -Constitution of the United States. He alleges that he had a vested interest in the 13.2 acres as a

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