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placing it beyond the reach of his creditors 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 pay. ment 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 within 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, shall be exempt from forced sale under any process of law," etc.
It will be observed there is no limit to the value of the improve. ments which may be placed upon the homestead 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, Colorado, 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, and selling live stock until the fall of 1885, when he failed, and became insolvent. About that time he sold his ranch and 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. The dealings of said defendant were so various, and his loans of money so numerous, and extending over several years' time, it is impossible to trace the funds used in purchasing and improving the homestead to any particular source, although it fairly appears that some 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 financial circumstances. 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.
The question presented in this case is simply this: Knowing himself to be insolvent, and unable to pay his debts, at the time he purchased the property, could he convert his assets, in the manner stated, into a homestead, and thus place it beyond the reach of his creditors? This question has been before the courts, and has been repeatedly adjudicated, but unfortunately the adjudications are not entirely in harmony. In Pratt v. Burr, 5 Biss. 36, where a defendant, a merchant in failing circumstances, and being insolvent, purchased a large amount of goods on credit, and soon thereafter transferred the goods, and received in part payment a house and lot, which was claimed as a homestead, the court held the transfer of property was made to defraud creditors, and that 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. Sharpless, 33 Gratt. 153. The fraudulent concealment of a debtor's property is a bar to defendant's right under the homestead law. Emerson v. Smith, 51 Pa. St. 90. Per contra, in Cipperly v. Rhodes, 53 Ill. 347, it was held that an insolvent debtor could purchase and hold a homestead, although it withdrew assets subject to the payment of his debts. A late case in point, and a very strong one in favor of an insolvent debtor's right to acquire a homestead, is by the supreme 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 family by purchasing a house with nonexempt assets,
takes nothing from his creditors which the law gives to them, or in which they have any vested right. It is a right which the law 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 Mich. 367; Culver v. Rogers, 28 Cal. 521; Randall v. Buffington, 10 Cal. 491. In King v. Goetz, 11 Pac. Rep. 658, the supreme court of California uses the following language:
"The law, for wise and beneficent purposes, secures to 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 of fraud for so doing.”
In Backer v. Meyer, 43 Fed. Rep. 704, Judge Caldwell 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 family homestead," etc.
See, also, Thomp. Homest. SS 305-307, and cases cited.
It seems to be well settled on principle and the preponderance of authority that an insolvent debtor, knowing himself to be insolvent, may acquire a homestead for himself and family, and hold the same exempt from his creditors, although purchased 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; but it seems harsh and unjust that a debtor may live in wealth, un.
der the provisions of a homestead law, while his creditors are kept out of what is justly due them; but 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 cannot be sustained, and must be dismissed.
CITIZENS' BANK OF LOUISIANA V. BOARD OF ASSESSORS FOR
THE PARISH OF ORLEANS et al.
(Circuit Court, E. D. Louisiana. January 23, 1893.)
No. 12,112. 1. TAXATION-EXEMPTIONS-PRESUMPTION8.
The presumption is always against an exemption from taxation, and the burden is on the party claiming ihe exemption to establish a legislative department thereof, shall never be abridged, secures to every person, natural or artificial, the right to apply to any department of the govertment, including the legislature, for the redress of grievances, or the bestowal of a right, and is also a guaranty of the enjoyment of such redress or right, when obtained, free from all forfeiture or penalty for having sought or obtained it; and when this article is read in connection with article 234, forbidding the legislature to remit the forfeiture of the charter of any existing corporation, or renew, alter, or amend the same, or pass any law for the banetit of such corporation, except upon condition that such corporation shall thereafter hold its charter subject to the provisions of the existing constitution, it is clear that the legislature is prohibited from at all impeding the right of petition, except that, when it has thus granted a favor to a corporation, it may interfere with that right so far as to exact a surrender of all privileges other than those which could be
intent to that effect by a clear preponderance of persuasive facts. 2. SAME-BANKING CAPITAL-CONSTITUTIONAL LAW.
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 its 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. The stockholders were not immediately to pay anything upon their subscriptions, but were merely to furnish mortgages upon cultivated lands and slaves. These mortgages 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 profits of the bank, but only a small fraction of the profits were to be distributed either to the state or to the shareholders until after the successive installments of the bonds had been paid. Thus, practically, all the stock, securities, and profits of the bank were pledged and impounded for the payment of the bonds. The act provided that the capital of the bank should be entirely exempt from taxation "during the continuance of its charter." Held that, as the exemption was for the purpose of facilitating the repayment to the state of the capital 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 state at any future time, for the purpose of securing the repayment of such advances; and, the charter having bean extended in 1874, the exemption also continued, although, by the constitution of 1868 tben 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. 8. SAME-WAIVER OF EXEMPTION.
None of the bonds having been paid, the legislature, in 1880, (Acts 1880, No. 79,) authorized the bank to compromise and settle the liability of the stockholders upon their mortgages, the sums realized therefrom to be applied in satisfaction of the state bonds, but provided that the act shculd 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 provided 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 1 CONSTITUTIONAL LAW-RIGHT OF PETITION-CORPORATIONS.
Article 5 of the constitution of Louisiana, which declares that the right of the people peaceably to assemble and petition the government, or any
granted under the existing constitution. 6. SAME-EXEMPTION FROM TAXATION-WAIVER.
It appearing that it would have been ruinous to the stockholders, and detrimental to the credit of the state, to enforce the payment of the stock mortgages according to the terms of the Citizens' Bank's charter, owing to the destruction of slave property, and the devastation of the war, the act of the state in authorizing the bank to compromise the liability of the stockholders upon their mortgages was for the benefit of the state, and for the purpose of ultimately securing payment of its bonds, and was therefore not a privilege or favor granted to the bank. Hence the legislature had no authority under the constitution to impose upon the bank the condition that the exemption from taxation should be thereafter waived; and, although the bank, by its acceptance of the act, intended to waive the exemption, the attempted waiver was of no effect, and the capital of the
bank is still exempt from taxation. 6. TAXATION-BANK SHARES.
The imposition of a tax upon the shares of the bank according to the Louisiana statute, which requires the bank to pay the tax, and then look to the dividends upon the shares and to the stockholders for reimbursement, is a tax upon the bank itself. New Orleans v. Houston, 7 Sup. Ct. Rep. 198, 119 U. S. 265, followed.
In Equity. Bill by the Citizens' Bank of Louisiana against the board of assessors for the parish of Orleans and others to enjoin the collection of taxes. Heard on application for an injunction pendente lite. Granted.
Henry C. Miller, for complainant.
E. A. O'Sullivan and Henry Renshaw, for city of New Orleans and board of assessors.
M. J. Cunningham, Atty. Gen., and R. Lyons, for tax collectors.
BILLINGS, District Judge. This case has been submitted upon an application for an injunction pendente lite. The defendants are about to levy and collect a tax upon the shares of the bank. The question to be passed upon is whether the shares are exempted from taxation. The original charter was granted in 1833. Acts 1833, p. 172. That act contemplated that the capital of the bank, which was fixed at $14,000,000, would be obtained by the issuance by the bank of its own bonds. The subscribers for the stock were to pay nothing upon their subscriptions, but were to furnish mortgages upon cultivated lands and slaves to secure the payment of their subscriptions. These mortgages were to be held as a security for the payment of the bonds. The bank, after three years of effort, found itself unable to negotiate its own bonds. Conse quently, in 1836, (Acts 1836, p. 16,) the charter of the bank was amended, and the bonds of the state were loaned to the bank as its capital, to the amount of $12,000,000. The state was to have a graduated interest in the profits of the bank,-a one-sixth interest in case the loan of bonds should be taken to the amount of the full capital. The amount of state bonds actually used by the bank was $7,000,000. In 1852 the charter of the bank, having been forfeited for a failure to comply with the law with reference to specie payment, (Acts 1852, p. 109, No. 141,) was restored to the corporation, and it was reinvested with all the rights and privileges which it enjoyed under the original and amended charter. The original and amended charter of the bank, which was for 51 years, and would have expired in 1884, was in 1874 (Acts 1874, p. 77, No. 40) extended for the further period of 27 years, viz. till 1911. At the time of the granting of the original and amended charters,—i. e. in 1833 and 1836,—there was no constitutional prohibition which directly or inferentially prevented the legislature from exempting from taxation the capital of the bank. In 1874, when the charter was extended, the constitution of 1868 was in force. Article 118 of that constitution is as follows:
"Taxation shall be equal and uniform throughout the state. All property shall be taxed in proportion to its value, to be ascertained as directed by law. The general assembly shall have power to exempt from taxation property actually used for church, school, or charitable purposes. The general assembly may levy an income tax upon all persons pursuing any occupation, trade, or calling; and all such persons shall obtain a license, as provided by law. All tax on incomes shall be pro rata on the amount of income, or business done; and all deeds of sale made, or that may be made, by collectors of taxes, shall be received by courts in evidence as prima facie valid sales. The general assembly shall levy a poll tax on all male inhabitants of this state over twentyone years old, for school and charitable purposes, which tax shall never exceed one dollar per annum."
The first question is as to the meaning and intent of the legislature in that part of the amended charter of 1836 upon the subject of the exemption of the bank from taxation; that is, the first question is, did the legislature, in the amended charter,-having established certain relations of the state to the bank, and declaring in section 4, p. 17, Acts 1836, “And the capital of said bank shall be exempted from any tax laid by the state, or by any parish or body politic under the authority of the state, during the continuance of its charter," it being provided that “the charter should continue fifty-one years,” (section 30, p. 192, Original Charter Acts 1833,)—mean that the exemption should arbitrarily cease at the end of 51 years, or that the exemption should continue so long as the existing relations of the state to the bank should require that the charter should continue?
In dealing with this question, regard must be had to the rule that, when it is claimed a statute creates an exemption from taxation, it is to be strictly construed, and that the presumption is against it. The foundation of this rule shows its meaning. It is founded upon the doctrine that taxation is so essential to the wel. fare of the state that the contract of exemption must be clearly