Smalley v. Laugenour

70 P. 786, 30 Wash. 307, 1902 Wash. LEXIS 687

• Court: Washington Supreme Court
• Decided: November 12, 1902
• Docket: No. 4241
• Status: Published

Opinion

The opinion of the court was delivered by

Fullerton, J.

This was an action of ejectment, brought by the respondents against the appellants and defendants to recover the possession of certain real property situated in Lincoln county, in this state. The action was tried by the court without a jury. The findings of fact are accepted by both sides as correct, and the cause is here on the question whether the proper judgment was entered upon the findings.

The findings of fact material to the inquiry are substantially these: The appellants are husband and wife, and acquired the land in controversy as early as the year 1885. On March 16, 1895, the respondents and one L. J. Hutchings, as partners, recovered a judgment in the superior court of Lincoln county on a community debt against the appellant Geo. F. Laugenour for the sum of $363.15. On April 12, 1899, execution was issued on the judgment, and levied on the land mentioned, under which, after due advertisement, it was sold at public auction to the respondents for the sum of $532.15, being the amount then due on the judgment. Thereafter the sale was confirmed by the court, and, after the time for redemption had expired, a sheriff’s deed was executed and delivered to the purchasers, which they caused to he recorded. On May 10, 1899, — three days before the execution sale took place, — the appellant Geo. F. Laugenour filed in the United States district court for .the district of Washington, his voluntary petition in bankruptcy, in the schedule to which he listed the land in controversy, claiming the same as exempt under the bankruptcy act. On May 11, 1899, the referee in bankruptcy, to whom the proceedings had been referred, adjudged the petitioner a bankrupt, and thereupon gave to the creditors of the bankrupt, shown in the schedule attached to the petition, among whom were the respondents, the formal notice required by the bankruptcy act, notifying them of the adjudication of bankruptcy, of the time and place fixed for the first meeting of the creditors, that they might attend at such meeting, prove their claims, examine the bankrupt, and transact such other business as should properly come before the meeting. Hone of the creditors appeared at the time fixed for the meeting, viz., June 5, 1899, and no trustee was elected or appointed; the referee finding that no necessity existed therefor. On August 9, 1899, the bankruptcy court entered an order discharging the bankrupt from all debts and claims made provable against the bankrupt’s estate, and on August 12th “regularly made an order in said bankruptcy proceedings setting aside to said bankrupt, as exempt under the act of congress relating to bankruptcy, the real estate hereinbefore described, and awarding said real estate to the said bankrupt.” The court further found that since the execution sale the appellants had been in possession of the real estate, claiming to be the owners of the same, and for several years last past had resided in Spokane county, Washington, .and that the real property, during the time, had been occupied by the defendant Harry Gilliland, as their tenant. On the facts so found it ruled that the respondents were the owners and entitled to the possession of the premises, and entered judgment accordingly.

The respondents move to dismiss the appeal, assigning as reasons therefore: (1) That the notice of appeal is insufficient; (2) that the notice of appeal given was not served on the defendants Green and Gilliland; and (3) that the appeal bond was not filed in time. The contention that the notice of appeal is insufficient is based upon the fact that it is not directed to the defendants Green and Gilliland, each of whom appeared in the action; the former by filing an answer disclaiming any interest in the subject-matter of the action, and the latter by setting up a leasehold interest expiring at a fixed time. It is said that because these parties had appeared in the action, and did not join in the notice of appeal, it was necessary to serve the notice of appeal on them; and that a notice of appeal not directed to a party, whether served on him or not, is ineffectual to bring that party before the appellate court. The defendant Green, having answered, disclaiming interest, was neither a necessary nor a proper party to the appeal, and service of notice upon him was unnecessary. Watson v. Sawyer, 12 Wash. 36 (40 Pac. 413). The interest of the defendant Gilliland in the premises, as shown by his answer, had expired before the trial of the action, and the judgment against him was to the effect that he had no interest, and it may be seriously questioned whether it was necessary to serve him with the notice of appeal at all. But conceding that it was, wé cannot agree that it was necessary that the notice be directed to him. The statute relating to notices of appeal does not, in terms, provide that it shall be directed to anyone. To appeal is not to institute an original proceeding, nor is the notice in any sense a summons or a writ to bring parties before the court. It is a notice, and nothing more. It would seem, therefore, that when the notice is properly entitled as of the action in which the appeal is taken, and informs the parties to the action who the appellants are, and the judgment or part of the judgment appealed from, it complies with all the requisites of a proper notice, and, consequently, with the directions of the statute. But if it be said the statute implies the requirement that the notice of appeal be directed to any of the parties, it is sufficient if it be directed to the prevailing parties. Two methods of giving notice of appeal are provided by the statute. The notice may be given orally in open court at the time the judgment or order appealed from is rendered or made, in which case the judge shall direct the clerk to make an entry of such notice in the journal of the court, or, “if the appeal be not taken when the judgment or order appealed from is rendered or made, then the party desiring to appeal may, by himself or his attorney, . . . serve written notice on the prevailing party or his attorney that he appeals from such judgment or order, . . Bal. Code, § 6503. A subsequent section (Id. § 6504), provides that all parties whose interests are similarly affected may join in the notice of appeal, and that any such party who has not joined in the notice when given may do so within ten days after the notice is served on them by filing a statement to that effect with the clerk of the superior court, or may within that time serve an independent notice of appeal; further providing that, when a notice of appeal is not given at the time the judgment or order appealed from is rendered or made, it shall be served on all parties who have appeared in the action. It is plain, however, that the purpose of this is not to make such parties parties to the appeal, but is for the purpose of giving them an opportunity to become such should they so desire. There can, then, be no implied requirement that the notice be directed to them. Here the notice was directed to the prevailing parties, and we hold it sufficient as a notice of appeal.

It appears that the attorneys representing the appellants also represented the defendant Gilliland in the court below. On taking the appeal they acknowledged service of the notice thereof on themselves as attorneys for Gilliland, and it is contended that this is sufficient to show a service of the notice on that defendant. If the service was insufficient, it is because the attorneys representing Gilliland in the court below were without authority to represent him on the appeal, and this want of authority must be gathered from the mere fact that they are the attorneys representing the appellants. But is this fact of itself sufficient to show a want of authority? We think not. Unless there is a conflict of interest between this defendant and the appellants, the same counsel can with propriety represent the interests of both; and, as the record shows no conflict of interest, it will not be presumed that any such exists.

The third ground of the motion is rendered pointless by the supplemental transcript sent up by the appellants. The motion to dismiss is denied.

' Passing to the merits of the controversy, it is at once obvious that the correctness of the judgment of the trial court must depend upon the effect that is given to the order of the bankruptcy court setting apart to- the bankrupt the property in question as property exempt from the claims of his creditors. It will b'e remembered that the statute of this state permits a head of a family to select from his or her real property a homestead of a limited value, and exempts the same from the liens of general judgments, and from execution or forced sales thereunder. (Ballinger’s Code, § 5214 et seq.); that the selection may be made at any time before sale (Wiss v. Stewart, 16 Wash. 376, 47 Pac. 736); and that an execution sale thereof after such selection is ineffectual to pass title to the purchaser (Wiss v. Stewart, supra; Asher v. Sekofsky, 10 Wash. 379, 38 Pac. 1133). If, therefore, the property in question was exempt from execution at the time the sale was made under the execution issued on the respondents’ judgment, the respondents acquired no title thereto by their purchase at the execution sale, and consequently have no title on which they can maintain the present action. How, the appellants were at liberty to establish this fact in one or both of two ways, — they could plead and prove facts showing the property to have been exempt from execution at the time of the sale, thus making the question directly an issue in the state court, or they could plead and prove that the question had been once adjudicated between the parties in a court of competent jurisdiction, having the parties and the subject-matter before it. The appellants chose the latter method. They sought to show that the property was exempt by showing that a bankruptcy court, having jurisdiction of the person and estate of the appellants, in a proceeding in bankruptcy in which the respondents’ judgment was provable, had awarded the property to the appellants as property exempt from the claims of his creditors. As this order related back to the time of the institution of the bankruptcy proceedings, it is res judicata, if it has the force of res judicata at all, that the property was exempt from sale at the time sale thereof was made, and hence an adjudication that the sale was void.

Why has not the order the effect of res judicata between the parties as to the status of the property at the time of the institution of the bankruptcy proceedings ? The respondents suggest several answers, and, as these involve the whole question, we will discuss them in order.

It is first said that the order is invalid because it was made by the judge of the court, while § 47, cl. 11, of the bankruptcy act (30 St. at Large, 557), makes it the duty of the trustee to “set apart the bankrupt’s exemptions.” The order here in consideration was made by the judge of the bankruptcy court while in the exercise of his judicial functions, and is the order of the bankrupt court. By § 2, cl. 11, of the bankruptcy act, the bankruptcy court is expressly vested with jurisdiction “to determine all claims of bankrupts to their exemptions, and by cl. 15 of the same section the court has jurisdiction to “make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of” the act. The first of these clearly confers upon the bankruptcy court power to determine what property of the bankrupt is and what is not exempt property, and the second clause just as clearly confers the power to make such orders as the court may find necessary to enable the bankrupt to become possessed of the property the act allows to him as exempt. On the other hand, the duties of the trustee with reference to the bankrupt’s exempt property are ministerial. While he is authorized by the act to set aside the bankrupt’s exemptions, he cannot determine disputed questions arising over the right to exemptions. Hor are his acts with relation to exemptions, where there is no dispute, in any sense final. He is obliged to report his doings to the court, and certainly the court can and would of its own motion correct his abusive acts, however the same might be called to its attention. There can be, therefore, it seems to us, no question as to the power of the bankruptcy court to make an order setting apart to a bankrupt certain property as exempt.

It is next said that, conceding the property to have been exempt, the title thereto would not have vested in a trustee, and the bankruptcy court'would have no jurisdiction over it. Aside from the fact that such a concession would seem to be fatal to the respondents’ title, as the property was not subject to execution sale if exempt, we cannot think the conclusion sound. The bankrupt is obligated to schedule all of his property in his petition in bankruptcy, — that which he claims as exempt as well as that to which he makes no such claim, — and it is the duty of the bankrupt court to determine and set apart to him the exemptions allowed by law. Clearly, the property is subjected to the jurisdiction of the court, no matter in whom the legal title thereto may be said to rest. To contend differently is to contend that the court’s order is a valid and binding adjudication when it decides that the property is not exempt, but a mere nullity when the decision is otherwise. However inconsistent the language of the act may be, it certainly did not contemplate such an absurdity as this. The clause of the bankruptcy act vesting in the trustee the title to all the bankrupt’s estate “except in so far as it is to property which is exempt” was intended, it seems to us, to do away with the necessity of a conveyance from the bankrupt to the trustee, and nothing more; it was not intended to deny to the bankruptcy court the power to make valid orders with reference to all or any of the bankrupt’s property, whatever may be its character, or whether the title may be in the bankrupt or the officer of the court.

Again, it is said that because in this case no trustee was appointed the court was without power to make a valid order with reference to the bankrupt’s exempt property. What we have said in answer to the last objection would seem to answer this, but there is an additional reason why the contention is unsound. The bankruptcy act (-§ 30) expressly empowers the supreme court of the Hnited States to prescribe all necessary rules for carrying the act into force and effect, and that court has, by rule XV., empowered the bankruptcy court to direct that no trustee be appointed where the schedule óf a voluntary bankrupt shows no assets, and no creditor appears at the first meeting ; using the term “assets” evidently in the. sense that there is no property available to the payment of the claims of the creditors or the expenses of the trustee, not that there is absolutely no property. See In re Levy, 101 Fed. 247. This rule, if valid, is as much a part of the bankrupt act as is any section or clause of that act; and, unless it is to be held that the supreme court exceeded its powers in the announcement of the rule, it cannot be held that the appointment of a trustee is necessary in order to enable the court to make a valid order with reference to exempt property. Ho reason is suggested why the rule is not within the legitimate powers of the supreme court, and, as we perceive none, we cannot but hold the ruling of the bankruptcy court to the effect that there was no necessity for the ap-. pointment of a trustee in the proceedings in question a valid order in no way affecting its other powers.

Again, it is said that the order setting apart the property as exempt was made without notice to the respondents and hence has no force as against them. To this it is a sufficient answer to say that the record does not bear out the fact here assumed. The trial court found that this order was “regularly made,” which presumes that all of the necessary steps were taken to give it validity, if it was within the power of the court to make it.

Lastly, it is said that the order of the court setting apart the property as exempt does not purport to, nor does it in law, affect existing liens upon the property set apart as exempt, and, unless the liens thereon be such as the law avoids of its own force, such liens may be enforced in the state court against and to the extent of the property affected by the lien, notwithstanding the order setting it apart as exempt and the discharge of the debt in bankruptcy. In cases of liens which can exist independent of the question whether or not the property is exempt, undoubtedly the rule here invoked would be applicable; but the lien of a general judgment is not such a lien. It is a lien upon real property, only, which is not exempt. Hence, if this property was exempt at the time of the filing of the petition in bankruptcy, the judgment under which it was sold was not a lien thereon, and to assume that the judgment was a lien is to assume that it was not exempt,— the very question at issue. It must be borne in mind that the order of the bankruptcy court related back to the time of the filing of the petition in bankruptcy, and is a judgment of that court that the property was exempt at that time, and is, in its effect, a judgment that the respondents’ judgment was not a lien on it. This being so, it cannot be said that it was set apart subject to a lien, or that the question whether the judgment of the respondents was or was not a lien on it was left open to investigation in the state courts.

The conclusion must follow, therefore, that the order of the bankruptcy court was an order of a court of competent jurisdiction, having the parties and the subject-matter before it. As such it is conclusive between the parties of the question decided. This question was that the real property in dispute was exempt from execution at the time the respondents attempted to sell ’it upon their judgment. The sale was, for that reason, void, and the appellants entitled to the judgment prayed for in their answer.

The judgment is reversed, and the cause remanded, with instructions to enter a judgment for the appellants in accordance with the prayer of the answer.

Reavis, C. J., and Mount, Anders and Dunbar, JJ., concur.