FEDEf,lAL ' " .;;, ' i
lands, pro?f!,! i?; of the It to a patent. 'Appellant, upon WeprI;JlClples of Jaw WhICh we facts bl-thebill,is the of the land, aliq,' from its enjoyit ,should', not be to use the title, of, the government to avoid "jpst share of state taxation." WisCQnsin ,Cent. B. Co. v. ',' " ,', ()f thecjrcuit court is ,aftirmed. '
Kll;LLY v.SPARKS, et ux. . (01rcu1t Cow;t. D.:Ka.Dsa& Janl18.l"Y 26,
InEquity.B1ll by James O. Kelly agaiIlstRichard M. Sparks and ¥ary Sparks, his wife, to subject real estate· claimed as a home'stea.dto the of a'judgment. Dismissed. 'Pa-rld OverIIleyer and J,. S. .Hur4 & Dunlap and Sample, for defendants. '
FO$TER, District Judge. This is procee4ing in the nature of a crediWJ,'8' bill to subject real estate occupied by defendants as a h9niestead to the payment of a judgm.ent recovered by complainant, in the district court'of Kingman county at the May term, 1887, for a transcript, of which was subsequently roed in Barbour county, where said land is situate4. It is alleged in the bill that said RiCMrd M. Sparks .and was at the time said debt was contracted and' said purchaBed, .insolvent, and largely indeboo<l to various and that between the months of November, 1885, said defendant Richard M. Sparks sold and disposed of a large amoUnt of his prQpe.rty, reaJ., and personal, which was subjecf:q, the payment of his debts, with the plJ,fpose and inte:nt to hinqer, delay, and defraud th!s complainant alid his other creditors; and that said Sparks, with the said fraudulent intent, and to keep the proceeds of, said sale from being subjooted tp the payment of bis debts, did about April, 1886, with' said purchase the land in controversy, 160 acres, and did expend large sums of IDqney, to wit, $5,000, in erecting buildings and making other ,on said land, and now occupies and claim.El, the same .as his homestead; that said land, w.as so purchased and improvements, made by said defendant with the intent and purpose of defrauding"his credito:rs. by covering up and concealing his money and prl>perty under a homestead claim, and thereby
KELLY V. SPARKS.
placing it beyond the reach of his creditor. with the fraudulent intent aforesaid, etc., and praying that said land may be ordered sold, and the proceeds subjected to the payment of the complainant's judgment. For answer to said bill, defendants admit the complainant's debt, and that defendant ;R. M. Sparks is insolvent, but deny he was insolvent when said debt was contracted., and deny that he disposed of his property with intent to hinder, delay, or defraud his creditors, or that he purchased said land and made the improvements thereon with such intent, but admit that he purchased said land, and improved the same, and now occupies and claims the same as a homestead., and aver that it is exempt from the payment of complainant's debt, etc. The constitution of the state of Kansas contains the following provision:
"A. homestead to the extent of 160 acres of farming land, or one acre wltbln the limits of an incorporated town or city, occupied as the residence by the family of the owner, together with all the improvements on the same, Bha1l be exempt from forced sale under any proC\lss. of law," etc.
It will .be observed there is no limit to the vaJueof the improvements which may be placed upon the by the debtor. The testimony in this case shows the land and the improvements to be worth about $7,000; that there is a mortgage· on the same for about $1,500; that defendant's family consists of a wife and several children, and the family are now occupying the premises as a homestead. The complainant's debt had its origin in Lafayette countY, Mo., where both of said parties formerly resided. Complainant at various times during the years 1882 to 1885 signed as surety for defendant several promissory notes to banks and individuals at Lexington, Mo., which notes complainant was afterwards compelled to pay. The proceeds of these notes were used by defendant R. M. Sparks in dealing in land and live stock in Missouri, Oolorado, and Kansas. About the years 1882 and 1883 said defendant came to Kansas, and purchased a large amount of land in Barbour county, and stocked it with cattle and sheep, and carried on the business of buying, feeding, ana selling live stock until the fall of 1885, when he failed., and became insolvent. About that time he sold his ranch anq all his stock, and used about $7,000 of the proceeds in purchasing and improving the place he now occupies as a homestead. The improvements cost about $4,000. At that time he knew he was insolvent, and in securing the homestead doubtless had in view primarily the purpose of providing a home for himself and family, which should be exempt from the claims of his creditors. n'he dealings of said defendant were so various, and his loans of money so numerous, and extending over several years' time, it is impoElSible "to trace the funds used in purchasing and improving the homestead to any particular source, although it fairly appears that BOme of the purchase money came indirectly from the money realized on these notes. At about the time this debt was incurred., Sparks was supposed'to be in good finaneial circumsta.nces. At that time he owned and lived on a valuable homestead in Lafayette county, Mo., .valued. at about $20,000, and he was supposed to be worth about $50,000.
i.! The question in this case 'is sim,ply this: Knowing hfn:u;;elfto be insolvent, and unable tapay his debts, at the time he ,pilrch8iSed the .property, could he,"convert his assets" in the manner 1lta1le,d,:into a homestead, and thus place it beyoD;d; the reach of his creditors? This question has been. before the courts, and has been I'epeatedly adjudicated, but unfort\mately the adjudications are not entirely in harmony. 111 Pratt v. :Burr, 5 Biss. 36, where a defend· ant, '0. merchant in failing circumstances, and being insolvent, purehased a large amount of goods on credit, and soon tllereafter trans· felTed the goods, and. received in part payment a .house and lot, wIDcll was claimed as a homestead, the court held' the transfer of property ,was made to, defraud creditors, and tha:t;the homestead claim could not be allowed. To the same effect, see Long v. Murphy, 27 Kan. 380; Riddell v. Shirley, 5 Cal. 488. An insolvent debtor claimed a homestead exemption in a stock of goods transferred'to hinder and delay creditors, and the claim was disallowed. Rose v. Sbarpless,33Gratt. 153. The fraudulent concealment of a debtpr'liI property is a bar to right under the homestead law., i!Emerson v. Smitb,,51. Pa.' st. 90. Per contra, in Cipperly v. Rhodelil,,53ID. 347, it was held that an insolvent debtor could pur· chase ,and hold a homestead, although it withdrew subject to ,thepB.yrnent of his debts. A late case in point, and a very strong one iri,Javor of an insolvent debt()r's right to acquire a homestead, is by tliesupreme court of Minnesota,-Jacoby v. Distilling Co., 43 N. W. Rep. 52,-in which the court says:
"A debtor, in securing a homstead for himself and famUy by purchasing a. i ,With nonexempt assets, · · · takes nothing from his creditors which the law gives to th,em, or in which. tMy have any vested right. · · · It 1s a right which thela#' gives him, subject to which every one gives him credit, and fraud can never be predicated on an act which the law permits."
-Citing Tucker v. Drake, 11 Allen, '145; O'Donnell v. Segar, 25 Micb,.. /,J67; Culver v.Rogers, 28 521; Randall y. Buffington, 10 Oal. 491. In King v.. Goetz, 11 Pac. Rep. 658, the supreme court of CaIjfornia the following language:
"The for wise and beneficent purposes, secures t9 the family a right to have. a homestead selected in the manner indicated by the statute, and this right may be exercised as well against existing as against future creditors without the imputation offra'lld for so doing."
In Backer v. Meyer, 43 Fed. Rep..704, Judge Oaldwell uses the following language:
"The. homestead of the defendant was purchased by Meyers after his insolvency, in the name of his wife; but this fact does not make it any the less the famUy homestead," etc.
See, also, Thomp. Romest. §§ 305··307, and cases cited. It seems to be well Settled on principle and the preponderance of authority that an insolvent debtor, knowing hiJ:nI;lelf to be insolvent, may acquire a homestead ·for himself and family, and hold the same exempt from his creditors, although .purcha.sed with nonexempt assets, and that fraud cannot be imputed to such act. The benef· icent object of a wise and just hOmestead law must be conceded; Dut it seems harsh and unjust that a debtor may live in wealth, un·
CITIZENS' BANK V. BOARD OF ASSESSORS.
der the provisions of a homestead law, while his creditors are kept out of what is justly due them; bilt that matter rests in the discretion of the lawmaking power, and credit is given the debtor in full view of this comprehensive exemption. It follows that this bill eannot be sustained, and must be dismissed.
OI'.rIZENS' BANK OF LOUISIANA v. BOARD OF ASSESSORS FOB THE PARISH OF ORLEANS et al.
(Circuit Court, E. D. Louis1ana. January 23, 1893.)
1. TAXATION-ExEMPTIONS-PRESUMPTIONS. The presumption is always against an exemption from taxation, and the
burdl'n is on the party claiming the exemption to establish a legislati,e 1J:1,tent to that effect by a. clear preponderance of persuasive facUl. By the charter of the Citizens' Bank of Louisiana, as amended by Acts La. 1836, p. 16, the state loaned to the bank $12,000,000 of iUl bonds, of which $7,000,000 were actually used. These bonds were to constitute the capital of the bank, and were indorsed by it and sold. '1 he stockholders were not immediately to pay anything upon their subscriptions, bnt were merely to furnish mortgages upon (,'ll1tivated lands and slaves. Thtlse mortgagE'S were to be held as security for payment of the bonds, and were to bear 5 per cent. interest. The bank was to build certain railroads and canals, which were ultimately to be turned over to the state, and the state was to have a. small share of the profiUl of the bank, bnt only a small fraction of the profits were to be distributed either to the state or totlw shareholders nntil after tb.':l successive installments. of the bonds had been paid. 'Chus, practically, all the stock, securities, and profits of the bank 'l,'iere pledged and impounded fOl' the payment of the bonds. The. act provided that the ca[lital of the bank should be entirely exempt from taxation "during the continuance of its charter." HeW that, as the exemption was for the purpose of facilitating the repayment to the state of the Qapital thus advanced, the exemption must be construed to continue, not only for the duration of its charter as then fixed, but for as long as the charter should exist as extended by the st'lte at any future time. for the purpl-se of securing the repayment of such advances; and, the chartpr having been extended in 1874, the exemption ulsocontinned, although, by the constitution of 1868 then in force, the power of exempting property from taxation, except such as was used for church, school, or charitable purposes, was denied to the legislature. of the bonds having been paid, the legislatu!.'e. in 1880, (Acts 1880, No. 79,) authorized the bank to compromise und settle the liability of the stockholders upon their mortgages, the sums realized therefrom to be in satisfaction of the state bonds. but provided that the act shGUld not take effect unless within 12 months it was accepted, under the conditions prescribed in articles 234 and 237 of the state constitution. Article 234 PfOvided that the legislature should not renew, alter, or amend the charter of any existing corporation, or pass any general or special law for the benefit thereof, except upon condition that such corporation should thereafter "hold its charter subject to the provisions of this constitution." Held that, by accepting the act of 1880, the bank consented to waive the exemption from taxation, and the exemption would then have ceased if the legislature had power under the constitution to impose this condition. Article Ii of the constitution of Louisiana, which declares that the right of the people peaceably to assemble andpetitioD the IOvernment, or any
SAME-BANKING CAPITAL-CONSTITUTIONAL LAW.
S. SAME-WAIVER OF EXEMPTION.
OONSTITUTIONAL LAW-RIGHT OF PETITION-CORPORATIONS.