Opinion
38774.
DECIDED APRIL 25, 1961.
Garnishment, etc. Columbus Municipal Court. Before Judge Bagley.
Young, Hollis Moseley, for plaintiff in error.
Swift, Pease, Davidson Chapman, Ray, Owens, Keil Thornton, Beverly R. Keil, contra.
A bankrupt debtor in perfecting his exemption of money, set aside to him in a bankruptcy proceeding, in a proceeding before the ordinary of the county of his residence under the provisions of Code § 51-601 must comply with the provisions of Code §§ 51-201, 51-301, 51-302 and 51-303 relating to the schedule to be attached to his application, the notice to be published by the ordinary, the notice to be given creditors by the applicant or his agent, and the time of the hearing. When such application is made, however, and a properly certified copy thereof filed in the court where a garnishment proceeding, involving a fund subject to the exemption as perfected, is pending against the bankrupt, the action in the latter court should be stayed pending the completion of the proceedings before the ordinary in compliance with the Code sections enumerated above.
DECIDED APRIL 25, 1961.
The plaintiff Lou Hill Co. obtained a judgment against the defendant Lyle K. Bjoralt in February, 1959, in the amount of $458.97 plus $14.50 costs. On April 4, 1960, the plaintiff filed a garnishment on said judgment in the Municipal Court of Columbus, the Columbus Bank Trust Company being named as the garnishee. On April 18, 1960, the defendant filed his bankruptcy petition in the United States District Court and was duly adjudicated a bankrupt by said court on April 29, 1960. On May 3, 1960, the defendant filed a plea for stay in the garnishment proceedings in the municipal court on account of his bankruptcy proceedings. On May 9, 1960, the garnishee filed its answer stating it was indebted to the defendant in the sum of $356.34, and prayed for stay of garnishment proceedings until final determination of the bankruptcy proceedings.
On October 12, 1960, the defendant filed his petition with the Ordinary of Muscogee County, Georgia, in which he recited that he was claiming, as a homestead in the pending bankruptcy proceedings, the funds held by the garnishee bank, and that after said funds were set aside to him he desired to invest said funds, under the direction of the ordinary, in articles of personal property which are exempt under the laws of the State of Georgia. The ordinary, on the same date the petition was filed, ordered the defendant to invest said funds in personal property and file his schedule of such investment with the court of ordinary.
On October 27, 1960, the defendant was discharged in bankruptcy. The funds in the hands of the garnishee were set aside by the referee to the defendant bankrupt as part of his homestead exemption. On November 10, 1960, the defendant filed a petition in the municipal court setting forth said facts and attached thereto a copy of his discharge in bankruptcy together with a certified copy of his application to convert said funds into personal property and the order of the ordinary, dated October 12, 1960, allowing same. It was also alleged in said petition that the plaintiff's claim was scheduled in the defendant's bankruptcy schedules and that the plaintiff was notified of said bankruptcy proceedings as required by law. A hearing was held in the municipal court on November 21, 1960, at which time the plaintiff made a motion to dismiss the pleadings filed by the defendant in said court on November 10. After hearing argument, the court took the matter under advisement. On December 1, 1960, the Ordinary of Muscogee County filed his petition in the municipal court asking that said funds be turned over to him for the purpose of investment on behalf of the defendant. The plaintiff renewed its motion to dismiss in writing on December 7, 1960. On December 12, 1960, the municipal court entered an order overruling the plaintiff's motion to dismiss, and on December 13, 1960, entered an order dismissing the garnishment proceedings. On this action of the municipal court, the plaintiff assigns error and brings the case to this court for review.
The facts in this case are similar to the factual situation presented in the case of Roquemore v. Goldstein, 100 Ga. App. 591 ( 112 S.E.2d 24), a case cited and relied upon by both of the parties in this case. In the Roquemore case the plaintiff had obtained a judgment against the defendant Roquemore and subsequently filed a garnishment against his employer on December 5, 1957. The employer (garnishee) made an answer on March 17, 1958, showing an indebtedness to Roquemore in the amount of $200.16, and on the same date Roquemore filed his voluntary petition and was adjudicated a bankrupt in the United States District Court. The bankrupt claimed this amount of money as a homestead and the referee set it aside for him as such. Upon his discharge in bankruptcy on June 30, 1958, Roquemore filed a petition for stay of execution and on the hearing introduced in evidence the discharge in bankruptcy. The court denied his motion to dismiss and entered a judgment in favor of the plaintiffs against Roquemore and his surety on the dissolution bond which he had posted. This judgment of the Civil Court of Fulton County was affirmed by the appellate division of that court and on appeal to this court was affirmed in an opinion written for the court by Judge Townsend. In the Roquemore case the bankrupt defendant relied entirely upon his discharge in bankruptcy as the record in that case did not show that an application had been made by the bankrupt to the ordinary of the county of his residence for direction to invest the funds in personal property. Judge Townsend pointed out that since cash cannot be set aside as a homestead exemption under Georgia law, the purported exemption was therefore not valid, and the funds were subject to garnishment by the judgment creditor. The opinion went further and stated (p. 593): "It follows that, while the debtor here is, under the decree of the bankruptcy court, entitled to a homestead exemption equal to the fund caught in the garnishment proceedings prior to his adjudication in bankruptcy, that fund cannot become a homestead under Georgia law so as to be freed from the lien of the garnishment until it has been converted from money (a commodity in which homestead cannot be acquired) into property, and this must be done by an order of and under the direction of the ordinary of the county of the debtor's residence. When such application is made, and a properly certified copy thereof filed in the court where the garnishment proceeding is pending, the action in the latter court should be stayed pending an order allowing the debtor to invest the money in personal property which may properly be the subject of the homestead exemption ( Code § 51-601, supra), the property in which the investment is sought to be made being such as is approved and directed by the ordinary. A properly certified copy of such order, filed in the court where the garnishment proceeding is pending, would necessarily so perfect the homestead sought to be set aside to the debtor by the referee in bankruptcy as to exempt it from the lien of the judgment creditor. So long, however, as it remains merely cash, and no application for investment has been made with the ordinary, it remains a commodity which cannot be the subject of homestead exemption, and therefore, not being exempt and not having been administered as a part of the bankrupt's estate, it is a fund against which a garnishment can legally proceed."
In the case under consideration the bankrupt defendant went a step further than the defendant in the Roquemore case and did file an application with the ordinary of the county of his residence for the purpose of investing said sum, under the direction of the ordinary, in articles of personal property which are exempt under the laws of the State of Georgia. This application was made pending the bankruptcy proceedings in the United States District Court and prior to his discharge in bankruptcy. A certified copy of this application, along with a certified copy of the discharge in bankruptcy, was attached as an exhibit to the petition filed by the defendant on December 10, 1960, in the municipal court, which petition as amended prayed for the court to direct the garnishee bank to turn over said funds to the Ordinary of Muscogee County to be invested under his direction in articles of personal property which are exempt under the laws of the State of Georgia. Under the decision in the Roquemore case this was sufficient action on the part of the bankrupt defendant to stay the garnishment proceedings in the municipal court pending an order allowing the investment of the money in personal property.
Also attached to the defendant's petition referred to above was the order of the ordinary dated October 12, 1960, the same date on which the application was filed with the ordinary. From an examination of the application itself and the order filed by the ordinary it is apparent on the face of same that the provisions of Code §§ 51-201, 51-301, 51-302 and 51-303 were not complied with. These sections relate to the schedule to be attached to such application, the notice to be published by the ordinary, the notice to be given creditors by the applicant or his agent, and the time of hearing the application. It is earnestly contended by counsel for Bjoralt that the provisions of these Code sections are not applicable in this case and that the bankrupt defendant need not comply with same in order to perfect the exemption which had been set aside by the referee in bankruptcy. With this contention we cannot agree. The action of the referee, as pointed out in the Roquemore case, did not set up a valid exemption and his action was "merely res judicata of the fact that the trustee did not administer it as a part of the bankrupt's estate for the benefit of his creditors." Roquemore v. Goldstein, 100 Ga. App. 591 (5), supra. Therefore, there was no valid homestead exemption in such funds and they would be subject to the lien of the garnishment unless some further action was taken by the bankrupt in the court of ordinary. Under such a situation it is apparent that creditors of the bankrupt would be entitled to a notice that the bankrupt was proceeding in the court of ordinary to have such funds withdrawn from the operation of such a lien. Without notice of such proceedings a creditor might attempt to assert his lien against such funds only to find that the bankrupt defendant had previously instituted the necessary proceedings in the court of ordinary, thereby defeating his lien and casting him with the costs and expenses of the litigation. We therefore hold that under the facts in this case a bankrupt defendant in perfecting his exemption of money set aside to him in a bankruptcy proceeding must comply with the provisions of Code § 51-601 and the sections mentioned above.
Since the sections relative to the published notice and the notice to creditors were not complied with, it follows that the order of the ordinary dated October 12, 1960, the same date the application was filed, was null and void. The record showing, however, that an application had been made to the ordinary and that a certified copy of such application was filed in the court where the garnishment proceedings were pending, is sufficient to afford the bankrupt defendant a stay of the garnishment proceedings. Any defect in the application itself may be cured by amendment at any time prior to the final proceedings before the ordinary. Code § 51-201 (3).
The judgment of the municipal court is therefore reversed with the direction that the garnishment proceedings be reinstated in that court pending the completion of the proceedings in the court of ordinary in compliance with the Code sections relative to the establishment of a homestead.
Judgment reversed with direction. Townsend, P. J., Carlisle and Frankum, JJ., concur.