$ 5.1 Marshaling of Assets Where One is a Member of Two Firms.

between a partnership estate and the estate of a member thereof. In the case In re May et al. (Fed. Cas. 9,327), it was decided by Lowell, J., that

"Partners and their estates come under the rule, for the reason that, in bankruptcy, estates are settled separately; the joint creditors are to have the joint estates, and vice versa, and although there is no contribution between joint and separate estates, unless there should be a surplus of one over the other, yet when the property of one is pledged for the debt of the other, a court of equity will apply the right of subrogation precisely as it would if the contracting parties were not partners, and thus do justice to the different creditors."

And see to same effect In re Foote (Fed. Cas. 4,906, 12 N. B. R. 337). And under the present act Judge Lowell has held (In re Dillon, 4 Am. B. R. 63; 100 Fed. 627) that where upon the dissolution of a firm one partner agrees with his retiring co-partners to become responsible for the payment of all firm debts and liabilities, the retiring partners become in equity sureties for the remaining partner, and this relationship is recognized in bankruptcy. Hence where the retiring partner is compelled to pay a debt of a firm in whole on in part he becomes subrogated to the claim of the creditor, pro tanto. Where the original creditor has not proved his claim the surety seeking to prove it must be required to prove it in the creditor's name. See further section 57i, post, on the rights of sureties.

It

Marshaling of Assets Where one is a Member of Two Firms.-In such cases the assets of the bankrupt will be so marshaled that the creditors of each firm will have priority in the distribution of the assets of the firms of which they are respectively creditors. would seem that if there is any surplus after paying the creditors of one firm, it should go to the individual creditors of the bankrupt, rather than to the creditors of the other partnership. (Compare in re Leland, Fed. Cas. 8,228; 5 Ben. 168; s. c. 5 N. B. R. 222; in re Hinds, Fed. Cas. 6,516; 3 N. B. R. 351.) If there is a surplus of individual assets it should be distributed pro rata among the creditors of both firms. (In re Dunkerson, 12 N. B. R. 391; Fed. Cas. 4,159.)

Exemptions.

[Ch. III.

Cross References.

Transferring of Cases From One Jurisdiction to Another.—(Compare section 32.)

As to Effect of Discharge of one Partner on Copartners.-(Compare section 16.)

As to Effect of Discharge Where One Partner Only is Adjudged Bankrupt. (Compare sections 14 and 17.)

Rights of Partners to Exemption from Firm Assets.-(Compare section 6.)

SEC. 6. Exemptions of Bankrupts.-a This act shall not affect the allowance to bankrupts of the exemptions which are prescribed by the State laws in force at the time of the filing of the petition in the State wherein they have had their domicil for the six months or the greater portion thereof immediately preceding the filing of the petition.

Analogous Provisions of Former Acts.

R. S. 5045; act of 1867. § 14 (amended by act of June 8th, 1872, ch. 330, and by act of March 23, 1873, ch. 235); act of 1841, § 3; act of 1800, §§ 18, 34, 35, 53.

Exemptions. The act of 1867 was more liberal than the present act in the exemptions allowed a bankrupt, for it gave him, first, certain specific articles necessary for a householder, such as are usually declared exempt by the laws of all States; second, such other property as is exempt by the laws of the U. S. from levy and sale upon execution; and, thirdly, such other property not included in the foregoing as was exempted from levy and sale upon execution by the laws of the state in which the bankrupt had his domicil. The present act allows only those exemptions to which the bankrupt would be entitled by the laws of the State wherein. he has had his domicil for the six months, or the greater portion. thereof, preceding the filing of the petition, which it will be re

§ 6.]

Constitutionality — The Trustee's Rights in Exempt Property.

membered is the necessary period of residence or domicil to give the court jurisdiction over the bankruptcy proceedings. Section 2 (1).

Constitutionality.-The provisions of the former bankruptcy act as to exemptions were assailed upon the ground of being unconstitutional, because of a lack of uniformity. The Constitution of the United States gives to Congress the power to establish a uniform system of bankruptcy. As the exemptions prescribed by the various State laws differ greatly in their character, value and requirements, it was frequently contended that this occasioned a lack of uniformity in the bankruptcy law, and that therefore it was unconstitutional. The decisions of the courts all uphold the constitutionality of such provision. The leading case upon the subject is in re Beckerford (Fed. Cas. 1,209; 1 Dill. 45; s. c. 4 N. B. R. 203) a decision by the United States Circuit Court, Judge Krekel, and sitting with him Justice Miller of the Supreme Court. These cases hold that the " uniformity " required applies

to National laws alone.

The Trustee's Rights in Exempt Property.-Section 70 (a) expressly excepts exempt property from that, the title to which passes to the trustee. That officer is charged by law with the duty of designating or setting apart the exempt property for the bankrupt (section 47a [11]) and the bankrupt is required by section 7 (8) to make a claim in his schedule for the exemptions to which he may be entitled. By section 2 (11), the court of bankruptcy is given jurisdiction to determine all claims of a bankrupt to exemptions. The proper practice then, in designating and securing exempt property, is clearly indicated in the statute, and if followed there can be no question as to the rights therein of the trustee and of the bankrupt.

While the voluntary bankrupt must file with his petition a claim for his exemptions, and in case of involuntary bankruptcy the claim must be preferred by him after adjudication, the severance in fact of exempted property from the general estate must be made by the trustee and its value is to be determined by the trus

The Trustee's Rights in Exempt Property.

[Ch. III.

tee, not by the debtor. (In re Friedrich [C. C. A.], 3 Am. B. R. 801; 100 Fed. 284.) The method of setting apart the exemption is prescribed in General Order 17, which requires the trustee to make a complete inventory of the property of the bankrupt immediately upon entering upon his duties and to make a report to the court within twenty days after receiving the notice of his appointment of the articles set off to the bankrupt by him, with the estimated value of each article (Form No. 47) and any creditor may take exceptions to the determination of the trustee within twenty days after the filing of the report, whereupon the referee may require the exceptions to be argued before him and shall certify them to the court for final determination at the request of either party. It seems to have been held by a number of writers on the subject of bankruptcy that appraisers may be selected to value the exemptions to be set apart to the bankrupt, but this view has no support in the statute according to the decision of the District Court of the Western District of North Carolina (In re Grimes, 2 Am. B. R. 730; 96 Fed. 529.) In his opinion in that case Judge Ewart says,

The law as to the duties of trustees in setting apart the exemptions in bankruptcy is mandatory. Bankruptcy Act 1898, sec. 47, subsecs. 10, 11, prescribe that the trustees shall

' (10) Report to the courts in writing the condition of the estates, and the amounts of money on hand, and such other details as may be required by the courts, within the first month after their appointment and every two months thereafter; . . . (11) set apart the bankrupt's exemption and report the items and estimated value thereof to the court as soon as practicable after their appointment.'

Exceptions to such allotment may be filed by the bankrupt, or by any creditor, within twenty days after the same has been made and filed with the clerk or referee. This duty cannot be performed by any other party. It is wholly and entirely the duty of the trustee, and any agreement on the part of the bankrupt or the creditors that the exemptions shall be allotted in any other manner than that prescribed by the Bankruptcy Law, or through other agencies than that of the trustee of the bankrupt, is a nullity. An impression seems to prevail that appraisers may be selected to value the exemptions to be set apart to the bankrupt, and even so careful a writer as Mr. Loveland, in his most excellent work on the Law and Proceedings in Bankruptcy, in his comments on the subject of exemptions, seems to have fallen into this error. On page 348 he says: If it becomes necessary to appraise exempt property

for the purpose of setting it off, it may be appraised, like other property of the bankrupt, by three disinterested appraisers appointed by the court;' and he cites, in his notes on the same page, Bankruptcy Act 1898, § 70, subsec. b. On examination of this section, the only reference to the appointment of appraisers is found in § 70, subsec. b. This prescribes that 'all real and personal property belonging to bankrupt estates shall be appraised by three disinterested appraisers; they shall be appointed by and report to the court. Real and personal property shall, when practicable, be sold subject to the approval of the court; it shall not be sold otherwise than subject to the approval of the court for less than seventy-five per centum of its appraised value.' It will be observed that this subsection in no wise authorizes and empowers appraisers to either value or set apart the bankrupt's exemptions. As a matter of course, in many cases in bankruptcy where the assets are nominal, and do not exceed the exemptions allotted, this appraisal is not necessary; but, where the assets are in excess of exemptions, the statute clearly requires that the property should be appraised. This inventory filed by appraisers may aid the trustee in making his allotment, but he is not in any wise concluded by it, nor has he any right to adopt it as his own. The object of the statute in requiring an appraisal of the estate of a bankrupt is evidenced by the last clause of this subsection, to wit: The real and personal property shall not be sold . . . for less than seventy-five per centum of its appraised value.' There were other exceptions to the allotment made by the appraisers of the bankrupts' exemptions, consideration of which is not necessary, as the allotment was fatal, for the reason above shown."

Waiver of Exemptions.-The right of a debtor to specifically waive exemptions must, of course, depend upon the law of the State, but the bankrupt may waive his right to have exemptions set apart by not claiming them (In re Nunn, D. C. Ga. 2 Am. B. R. 664), and it is held in the same district (Georgia) that a bankrupt claiming an exemption must make a full and fair disclosure of his property and he forfeits his claim where he has been guilty of fraud in withholding his assets. (In re Waxelbaum, 4 Am. B. R. 120; 101 Fed. 228.)

If the exemption is of property of a certain kind which the bankrupt is entitled to specifically, regardless of the amount of it, or of its value, or of his own circumstances, then it has been held that his failure to claim it will not deprive him of his right to it. But the general principle applicable to such cases is that he is bound to claim his rights, and if he does not do so he will be deemed to have waived them. (Green v. Blunt, 59 Iowa, 79; Wicker v. Comstock, 52 Wis. 315; Pond v. Kimball, 101 Mass. 105; Spitley v.