Opinion
1 Div. 969.
January 19, 1939.
Appeal from Circuit Court, Mobile County; Claude A. Grayson, Judge.
Stevens, McCorvey, McLeod, Goode Turner, of Mobile, for appellants.
The bill is not subject to the demurrer that complainants did not contest the respondent's claim of exemption within the time required. There is no provision of law for contest of claim of exemptions until process reaches the hands of an officer for levy upon the property in dispute. There must be litigation actually begun before contest can be filed in the probate office. Code, § 7890 et seq. The property being of value in excess of the exemption allowed, the creditor has a right to set aside the conveyance and subject the value of the property in excess of the exemption to the satisfaction of his claim. It is not necessary that he be a judgment creditor. Galloway v. Shaddix, 197 Ala. 273, 72 So. 617; Zelnicker v. Brigham, 74 Ala. 598; Kennedy v. First Nat. Bank, 107 Ala. 170, 18 So. 396, 36 L.R.A. 308. The bill constitutes, in effect, a contest of the claim of exemptions filed in the probate office. The method sought to be pursued here is the only proper method to challenge the claim. Tonsmere v. Buckland, 88 Ala. 312, 6 So. 904; Thompson v. Sheppard, 85 Ala. 611, 5 So. 334; Planters' Chem. Oil Co. v. Graham, 202 Ala. 482, 80 So. 866.
Outlaw Seale, of Mobile, for appellee.
Claim of exemptions must be contested in the manner provided by law, and no other mode may be adopted without the consent of the party claiming exemption. It affirmatively appears from the bill to set aside conveyance as in fraud of creditors that there is an outstanding and uncontested claim of exemption in the probate court; the creditor may not assail the fact that the property is exempt, and demurrer taking the point is properly sustained. Code, §§ 7890, 7892, 7895-7898, 7900, 7909, 7910, 7917; Block v. George, 70 Ala. 409; McClarin v. Anderson, 104 Ala. 201, 16 So. 639; 29 C.J., Homesteads, § 72, § 539. A transfer of exempt property to a volunteer works no fraud on creditors. Benson Hdwe. Co. v. Roberts, 202 Ala. 268, 80 So. 106. Respondent might set up the fact that claim had been filed, as a complete defense until that claim has been successfully contested in the manner provided by statute, might enter into a contest of the exempt status of the property, or might wait until the property should be ordered sold. Code, § 7890; Kennedy v. First Nat. Bank, 107 Ala. 170, 18 So. 396, 36 L.R.A. 308; Block v. George, supra; Hines v. Duncan, 79 Ala. 112, 58 Am.Rep. 580; Martin v. Lile, 63 Ala. 406. But the matter of exemption claim appearing on the face of the bill, the demurrer raises the question.
Complainants were existing simple contract creditors of the defendant grantor Zavia Lartigue at the time when the deed, upon a voluntary consideration, was executed by him to his wife. There can, therefore, be no serious contention against the sufficiency of the bill as one to set aside the deed as in fraud of creditors. Section 8038, Code of 1923; Hartzog v. Andalusia National Bank, 222 Ala. 170, 131 So. 433, and authorities therein cited.
But the bill proceeds to state additional facts which give rise to grounds of demurrer interposed, and which the chancellor sustained.
It is alleged that the property conveyed was owned by defendant grantor when complainants' debt was created, which indebtedness is by open account, and that said defendant grantor on August 13, 1934, had filed in the office of the judge of probate a claim of exemption, embracing this real estate and alleging that it constituted his homestead and was of value less than two thousand dollars. A few days thereafter the deed to his wife was executed disclosing on its face it was a voluntary conveyance. The claim of exemption and copy of the deed are made exhibits to the bill.
The further averment is that the said real estate at the time of the filing of the claim of exemption, and at all times since, was worth considerably more than two thousand dollars, and that said grantor has no other property which could be subjected to the payment of their indebtedness.
The prayer of the bill is to have the deed set aside as in fraud of creditors and a sale of the property to the end that the proceeds in excess of $2000 may be appropriated to the payment of complainants' indebtedness.
In brief, the bill is one to annul a fraudulent conveyance and to contest the debtor's exemption claim as to the value of the homestead. The demurrer takes the point, (and it is evident the learned chancellor acted upon that theory) that as no contest had been interposed to the exemption claim as filed, in the manner provided by the statute, the matter was closed and not open for future inquiry, as here sought.
This theory is rested upon the provisions of section 7894, Code of 1923. But we are persuaded this statutory provision is without application to the case as here presented. All related sections of the Code indicate that section 7894 has reference to a claim which has become the subject of a suit at law. Illustrative is the language of the succeeding section (7895, Code) as to the method of contest by the "plaintiff," and makes reference to "the officer holding the process."
But here there was no suit begun or pending, no "plaintiff" or "process." Complainants were simple contract creditors, and the statute made no provision for any contest by them when the declaration of exemption was filed.
In Toenes v. Moog, 78 Ala. 558, the Court observed that the statute then in force did not provide all modes for asserting or contesting claims of exemptions, pointing out a number of instances. And in Tonsmere v. Buckland, 88 Ala. 312, 6 So. 904, it was said [page 905]: "The mode of claiming exemptions, and of contesting the same, although intended to be harmonious as far as practicable, is nevertheless somewhat varied, and shaded by the nature of the proceedings or process under which the condemnation is sought. The statutes contain no special provisions for such claim or contest in the chancery court. Nevertheless, the right being clear and of constitutional guaranty, chancery grants relief according to its own peculiar methods."
And the case of Cross v. Bank of Ensley, 205 Ala. 274, 87 So. 843, furnishes an apt illustration following in this respect Kennedy v. First National Bank, 107 Ala. 170, 18 So. 396, 36 L.R.A. 308.
There is yet no statutory provision for assertion of a claim for homestead exemptions in equity nor for a contest thereof, but our decisions nevertheless disclose that a court of equity, having assumed jurisdiction of a cause, will grant full and appropriate relief in accordance with its own peculiar methods.
It is not reasonable to assume that because complainants stood by and refrained from harassing this debtor with a suit on this claim they are to be penalized for their leniency, and the debtor be permitted to profit by the mere filing of an ex parte declaration in the probate office. True, such claim is prima facie correct (Section 7892, Code of 1923; Planters' Chemical Oil Co. v. Graham, 202 Ala. 482, 80 So. 866), but no contest is provided by statute for such a claim so far as complainants are concerned, and we find no indication therein that as to them the mere filing of the claim is a conclusive bar. The equity court acquired jurisdiction of this cause to set aside the deed as fraudulent and to subject the property to the satisfaction of this indebtedness. "Equity delights to do justice and not by halves." The debtor suffered no injury.
The bill avers the property was worth largely more than $2,000; and the equity court will protect the debtor to the extent of his exemptions and subject only the excess to the payment of his indebtedness.
It was not contemplated that a debtor with a most valuable home could, by merely filing an ex parte declaration, deed it to his wife for love and affection, and thereby forever preclude an inquiry as to its value, merely because the creditor had instituted no suit. While our exemption statutes are to be liberally construed, as they serve a beneficent purpose, yet there is nothing in our statute indicating any sanction of the principle that they may be used for the profit of a fraudulent grantor. The debtor is entitled to full protection of his exemption rights, but no more.
We have concluded, therefore, that the demurrer to the bill should have been overruled. It results that the decree is due to be reversed and the cause remanded.
Reversed and remanded.
THOMAS, BOULDIN, and FOSTER, JJ., concur.