In the Matter of James George Stafos, Bankrupt-Appellant v. Laurence M. Jarvis, Trustee in Bankruptcy ( 1973 )


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  • BARRETT, Circuit Judge.

    James George Stafos filed a voluntary petition in bankruptcy on December 24, 1970, listing unsecured debts of $612,-132.06 which he had incurred as a self-employed broker-distributor and packager of truck farming produce. He claimed as exempt homestead property, inter alia, a 13.2 acre tract of land in Wyandotte County, Kansas, acquired by him and his wife, Reva, who is not a party to this proceeding, in 1945 as joint tenants, with right of survivorship. Stafos, his wife and children have continually resided on the property since 1945. In his petition, Stafos estimated the value of the property at $35,000.00. With some minor exceptions, the property has been used as the family home and for farm crop income. Reva Stafos has been actively engaged in the farm operations on the acreage and some 60 acres of adjacent leased acreage. Stafos testified that they did about $200,000.00 “worth of business” from the farming operation in 1971.

    Stafos relied upon the provisions of Article 15, § 9 of the Kansas Constitution 1 and K.S.A. § 60-2301 in support *371of his contention that the entire 13.2 acres is exempt. The language contained in the above cited statute is identical to the language contained in Article 15, § 9. Until March 1, 1966, the acreage was located outside the limits of any incorporated city or town. On that date, by ordinance enacted in accordance with the then applicable law, the 13.2 ácres was annexed to the city of Kansas City, Kansas. Neither Stafos nor his wife consented to the annexation, nor is there any evidence that they were movants in respect thereto. No portion of the acreage has been platted.

    The Trustee in Bankruptcy filed his report on March 4, 1971, allowing Stafos one acre to be set aside as his exempt homestead, which is to include his family home out of the total 13.2 acres, value unknown. Stafos objected and a hearing was held before the Referee in Bankruptcy on March 18,1971. One Rex Vickers, a real estate expert, testified that on that date the Stafos acreage was part of the “Muncie Industrial Area” zoned “J” for heavy industry and that considerable industry had already located in the immediate vicinity. He further testified that part of the Stafos acreage had been previously used as an office building constructed by Miller Construction Company, now occupied and used as a salvage yard at a monthly rental to Stafos of $140.00. He also testified with respect to a building used by Fouts Trucking Company. In his expert opinion “the whole area there gives the complexion of an industrial site and an industrial area; not a farm.” He would not classify the acreage as rural land, but rather as urban industrial land of a minimum value of $10,000.00 per acre. He did acknowledge that when he viewed the acreage the only major visible use being made thereof was farming. Harry Duckers, County Agricultural Agent, testified that the Stafos’ have continually farmed the land since 1948.

    On January 24, 1972, the Referee filed his Order, with detailed findings and conclusions, approving the Trustee’s Report and denying Stafos’ objection. From that Order Stafos filed his petition for review before the presiding United States District Judge, Honorable Earl E. O’Connor. The Court entered its Order on May 19,1972, fully adopting the Referee’s findings and conclusions. It held that annexation reduced Stafos’ homestead to one acre. It is from that Order that this appeal is taken.

    Stafos contends here, as he did below, that the federal courts should abstain because the homestead exemption issue decided in In The Matter of Stafos, Bankrupt, 354 F.Supp. 299 (D.Kan.1972), has not been decided by the Kansas state courts and that the Kansas courts are the best judges of the Kansas Constitution. We have no argument with these contentions, per se. 11 U.S. C.A. § 24 allows bankrupts the exemptions prescribed by state laws at the date of filing. In Re Cummings, 413 F.2d 1281 (10th Cir. 1969), cert. denied Sears, Roebuck & Co. v. Horton, 397 U. S. 915, 90 S.Ct. 918, 25 L.Ed.2d 95 (1970). While a state procedure in the nature of a Declaratory Judgment action was available to the Trustee after Stafos filed his homestead claim (K.S.A. § 60-1701 et seq.), this does not detract from the fact that the federal district court had exclusive jurisdiction of the subject matter. In Re Cummings, supra; Texaco, Inc. v. Pruitt, 396 F.2d 237 (10th Cir. 1968). While dictum and therefore not directly controlling, we note that the following language from Sarahas v. Fenlon, 5 Kan. 592 (1870) has not been repudiated by subsequent Kansas decisions :

    [H]e [the owner] could hold but one acre as a homestead, exempt from execution, no matter whether it was worth $10 or $10,000, or whether it was used for farming purposes or *372was covered all over with palatial residences. One acre is all that is exempt as a homestead under the Constitution. If he lived on that part in the city, that acre would be his homestead, and the residue of the city property, as well as his land in the country, would be subject to forced sale under execution. This is the plain letter of the Constitution; . . . 5 Kan. 592 at 596.

    The decision of the federal trial court as to the law of the state where he is sitting will be accepted on appeal unless clearly erroneous. Industrial Indemnity Company v. Continental Casualty Company, 375 F.2d 183 (10th Cir. 1967). Certainly Sarahas v. Fenlon, supra, weighs heavily in favor of the trial court’s application of Kansas law. One court has held that in the absence. of ascertainable state court interpretation, the bankruptcy court must construe the statute and determine its application. Doethlaff v. Penn Mut. Life Ins. Co., 117 F.2d 582 (6th Cir. 1941), cert. denied 313 U.S. 579, 61 S.Ct. 1100, 85 L.Ed. 1536 (1941). In addition, the rights of creditors have been held in “limbo” awaiting resolution of this exemption issue for more than two years. This case does not present all of those “special circumstances” dictating the imposition of abstention- as in Kaiser Steel Corp. v. W. S. Ranch Co., 391 U.S. 593, 88 S.Ct. 1753, 20 L.Ed.2d 835 (1968); Baggett v. Bullitt, 377 U.S. 360, 84 S.Ct. 1316, 12 L.Ed.2d 377 (1964), and Meredith v. Winter Haven, 320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9 (1943).

    Stafos alleges that the trial court erred, as a matter of law, in adopting the findings and conclusions of the Referee. He contends that a farming homestead is exempt from forced sale under any process of law and cannot be alienated without the joint consent of husband and wife even though it was annexed to the City without depriving him of due process of law in violation of the Fourteenth Amendment to the -Constitution of the United States. He alleges that he had a vested interest in the 13.2 acres as a farming land homestead within the meaning of the Kansas Constitution prior to the passage of the City Ordinance incorporating the 13.2 acres because he and his wife owned the property as joint tenants.

    • The test of our review is prescribed under Rule 52, Fed.R.Civ.P., as required by 11 U.S.C.A. § 47(b) and Bankruptcy Gen.Order 36, 28 U.S.C.A., which specifically provide that the United States Courts of Appeal shall exercise appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in the form and manner of an appeal in civil actions, including Rules of Civil Procedure for the District Courts.

    The question for the appellate court under Rule 52(a) is not whether it would have made the findings the trial court did, but whether “on the entire evidence [it] is left with the definite and firm conviction that a mistake has been committed.” Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 123, 89 S.Ct. 1562, 1576, 23 L.Ed.2d 129 (1969).

    The same rule applies in cases involving constitutional rights. Williams v. Eaton, 468 F.2d 1079 (10th Cir. 1972). If a trial court adopts a Referee’s findings and conclusions, they are thereby adopted and approved as its own. Earhart v. Callan, 221 F.2d 160 (9th Cir. 1955), cert. denied 350 U.S. 829, 76 S.Ct. 59, 100 L.Ed. 740 (1955). Under Bankruptcy General Order 47, 28 U.S.C.A., the Trial Court is bound to accept the Referee’s findings of fact unless they are clearly erroneous. Moran Bros., Inc. v. Yinger, 323. F.2d 699 (10th Cir. 1963). The “clearly erroneous” rule does not apply on questions of law or on mixed questions of fact and law. See cases cited in 9 Wright & Miller, Federal Practice and Procedure: Civil §§ 2588, 2589; Wright, Law of Federal Courts, 2nd Ed., § 96. However, in our Circuit it is settled law that the views of a Federal Dis*373triet Judge, who is a resident of the state where the controversy arose in a case involving interpretations of the law of that state, carry extraordinary persuasive force on appeal, if the Court of Appeals is not aided in its consideration by either administrative interpretation or judicial expression from state courts. Hardberger and Smylie v. Employers Mutual Liability Insurance Company of Wisconsin, 444 F.2d 1318 (10th Cir. 1971); Hamblin v. Mountain States Telephone and Telegraph Company, 271 F.2d 562 (10th Cir. 1959); Bradshaw v. Superior Oil Co., 164 F.2d 165 (10th Cir. 1947).

    The Referee and the Trial Court relied on the weight of case authority in limiting Stafos to a one-acre homestead exemption which must include the “home” or “residence” of the family, by specific reference to the general rule set forth in 40 C.J.S. Homesteads § 58:

    While there is authority to the contrary, in most jurisdictions where the question has been raised it has been held that, even without the owner’s consent and against his wishes, the limits of a city, town, or village may be extended so as to include what was formerly a rural homestead and to afford the owner only the amount available as an urban homestead. Where the mere fact that land lies within the boundaries of the city, town, or village, is not regarded as necessarily stamping it with the character of urban property for homestead purposes, as discussed supra § 53, it is necessary, in order that the owner shall lose the right to a rural homestead and be restricted to the right to an urban homestead, that the land, in addition to being embraced within the extended municipal limits, shall be otherwise actually impressed with an urban character. .

    We specifically concur with the findings of the Referee and Trial Court that although the Stafos acreage remains unplatted, that neither the Kansas Constitution nor statutes require that the land incorporated be platted or laid out for urban purposes in order to be impressed with urban character. There is substantial evidence supporting the finding that the character of the Stafos acreage is urban and that his homestead should be limited to one acre after annexation. Nothing expressed in the Kansas Constitution, Article 15, § 9, K.S.A. § 60-2301, or the Kansas decisions which we have reviewed in detail convince us that the trial court committed error. United States v. Jones, 229 F.2d 84 (10th Cir. 1955).

    Affirmed.

    . Article 15, § 9 provides in pertinent part: A homestead to the extent of one hundred and sixty acres of farming land, or of one acre within the limits of an incorporated town or city, occupied as a residence by the family of the owner, together with all the improvements on the same, shall be exempted from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife, when that relation exists; but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements there*371on: Provided, The provisions of this section shall not apply to any process of law obtained by virtue of a lien given by the consent of both husband and wife: . . .

Document Info

Docket Number: 72-1495

Judges: Murrah, Seth, Barrett

Filed Date: 5/31/1973

Precedential Status: Precedential

Modified Date: 10/19/2024