
    George B. France v. William Hohnbaum et al.
    
    Filed January 5, 1905.
    No. 13,641.
    1. Homestead: Liens: Priorities. Where a mortgage lien exists upon a tract of land claimed as a homestead, and the mortgage debt is paid .with the proceeds arising from a loan secured by a new mortgage on the same land, the interest of the claimant in the land being less than $2,000 in value in excess of the original mortgage debt, a judgment of a county court, a transcript of which was filed in the office of the clerlt of the district court while the old mortgage was in force, is not a lien on the premises superior to that created by the new mortgage.
    2. -: Appraisement. Where a creditor files a petition under the statute for the appointment of appraisers to set aside a homestead, it is not error to allow the homestead claimant to file an answer and to contest the question whether the value of the homestead exceeds the amount of the homestead exemption before appraisers are appointed. If the court in such case finds that the value does not exceed the exemption it is entirely proper to refuse to appoint appraisers.
    Error to the district court for York county: Samuel H. Sornborger, Judge.
    
      Affirmed.
    
    
      George B. Franco and Meeker & Wray, for plaintiff in error.
    
      F. O. Power and Gilbert Bros., contra.
    
    
      
       Rehearing denied. See opinion, p. 74, post.
      
    
   Letton, G.

This is an error proceeding brought to review a judgment of the district court for York county refusing to appoint appraisers to set off the homestead of defendant in error. The facts are as follows: On May 10, 1888, plaintiff in error recovered a judgment against defendant in error in the county court of York county, a transcript of which was filed in the office of the clerk of the district court for that county on the 12th of the same month. Executions were issued upon this judgment from time to time, hut no levy made on account of no property being found, and the judgment was thus kept from becoming dormant. On August 6, 1903, an execution was issued on the judgment and was levied upon a 62-acre tract of land upon which the defendant in error resided as, his homestead. Plaintiff in error then filed his petition in the district court under the provisions of section 6 of the homestead act (Oh. 36, Comp. St. 1903, Ann. St. 6205), praying for the appointment of appraisers to set aside the homestead interest of the execution debtor. Notice Avas duly giAren of the time and place of the hearing, and before the hearing defendant in error filed an answer to the petition. A motion was made to strike the answer from the files on the grounds that no anSAver is authorized in this proceeding, and that no trial should be had at this time, but the motion Aras overruled and exception taken.

It appears that before the judgment of plaintiff in error Avas obtained 22 acres of the 62-acre tract which Avas claimed as a homestead, had been mortgaged to one Holt, and that the remaining 10 acres had been mortgaged to one Marvel. For convenience we aauII consider the 22-acre tract and the 40-acre tract separately, though in fact they are contiguous and form one body of land on AA'hich defendant in error resides. On December 12, 1890, the Holt mortgage was foreclosed, plaintiff in error being a party to the proceedings; the court found due on the mortgage the sum of $925, with interest and costs; found the 22 acres to be of less value than $1,000; that it Avas a homestead, and that plaintiff in error’s judgment was not a lien on the same. Soon after this decree was rendered this tract Avas conveyed to one Miltner by defendant in error. Miltner on the 19th day of September, 1891, executed a mortgage to one Bowen, who lived in Illinois, for the sum of $1,000, and then reconveyed the premises to defendant in error. The money thus borrowed from Bowen was used to pay off the Holt decree on September 28.1891. On January 9, 1900, defendant in error together with his son, who owned a small tract of land adjoining this, borrowed $1,800 from one Hummell, who also resided in Illinois, giving a mortgage covering the 22 acres and the son’s land also. This mortgage was recorded on January 11, 1900. A release of the mortgage given to Bowen was executed in Illinois on December 30, 1899, but the testimony shows it was not delivered until the debt was paid with part of the money derived from the Hummell loan of $1,800, defendant in error testifying that it took $1,100 of that money to pay off the Bowen mortgage. The $1,800 mortgage to Hummell, of which defendant in error owed $1,100, was found to be a lien on the land by the district court, and we do not see how any other conclusion was possible.

As to the 40-acre tract, in 1884, a mortgage loan was made to one Marvel by defendant in error on this part of the land. On June 4, 1896, this mortgage was foreclosed in an action-to which plaintiff in error was a party, and the decree found due the plaintiff the sum of $800, with interest and costs; found premises to be a homestead of less value than $2,000, and found that plaintiff in error’s judgment was not a lien on the sanie. On December 31, 1897, $550 was borrowed by defendant in error from Mr. Hummell, and this was used in paying off and satisfying the decree, Avhich Aims satisfied of record January 8, 1898. A mortgage Avas given at the time of the loan to secure the payment of the debt, which was still unpaid at the time of the hearing.

From this statement it Avill be seen that at the time of the hearing there Avere valid liens existing against the land amounting to at least $1,660. A number of witnesses were examined as to the value of the premises. The trial court found the total value to be $3,100, and this finding seems to be fair and just from the testimony. It is evident therefore that unless the making of a new mortgage to pay off a prior one divested the defendant in error of his homestead rights, no ground existed for the appointment of appraisers. It appears however that at no time were the premises free from a mortgage lien. A new one was created before the old was released. There was no time in which the lien of the judgment could interpose, if such a thing were possible at all, which we do not decide. The interest of the defendant in error has always been less than $2,000 in the premises, and there was nothing in existence upon which the plaintiff could levy his execution. The action of the court in refusing to appoint appraisers therefore was proper.

As to the assignment that the court erred in not striking the answer from the files and in trying the issue as to homestead before the appointment of appraisers, the statute requires the application to be made on a verified petition shoAving: (1) The fact that an execution has been levied on property Avhich had been claimed as a homestead; (2) the name of the claimant; (3) that the value of the homestead exceeds the amount of the homestead exemption. A notice of the time and place of hearing is required to be served upon the claimant at least ten days befoi*e the hearing. At the hearing, upon proof of service and of the facts stated in the petition, the court shall appoint appraisers. It is necessary therefore for the creditor to prove at the hearing that the value of the homestead exceeds the amount of the homestead exemption. We see no reason Avhy the claimant cannot contest the proof offered by the creditor, Avhether an ansAver is filed or not. While there is no provision made in the statute for the filing of an ansAver, the manner of procedure is within the discretion of the district court, and unless an abuse of this discretion is shown a re-' viewing court Avill not interfere. If appraisers had been appointed who had reported their finding to the court, there is no doubt that the homestead claimant might have filed objections to their report and had a hearing upon the same before it Avas confirmed. But he Avas not obliged to wait until the report came in, unless he so desired, if the court was willing to grant him a liearingbefore the appraisers Avere sent out. The action of the court in this instance seems to have been fair and proper, and designed to save the unnecessary expense of making an appraisement.

Homestead: Liens: Piuoeities. AVhere the extent of the homestead and the value of the claimant’s interest therein are less than that allowed him by law, a mortgage placed thereon after the rendition of a judgment against such claimant, for the purpose of paying off a prior mortgage, will not be affected by such judgment.

We recommend that the judgment of the district court be affirmed.

Ames and Oldham, CC., concur.

By the Court: For the reasons stated in the foregoing-opinion, the judgment of the district court is

Affirmed.

The folloAving opinion on motion for rehearing Avas filed September 20, 1905. Rehearing denied:

Barnes, J.

The questions involved in this case were decided by an opinion Avritten by Mr. Commissioner Letton, ante, p. 70, where it Avas held that a certain judgment in favor of the plaintiff and against the defendants Avas not a lien on the defendants’ homestead superior to a mortgage, the proceeds of which Avere used to pay off another mortgage which Avas executed and recorded prior to the time the judgment Avas obtained; and that the' court could refuse to appoint appraisers to appraise the defendants’, homestead, Avhich Avas sought to be subjected to execution sale, where it clearly appeared that such homestead did not exceed 160 acres in extent, and that the' defendants’ interest therein was less than $2,000. Plaintiff, having filed a motion for a rehearing, in his brief and on the oral argument contends that our decision conflicts with the rule announced in Beach v. Reed, 55 Neb. 605; Horbach v. Smiley, 51 Neb. 217, and Brown v. Campbell, 68 Neb. 103.

An examination shows that the question involved in Beach v. Reed was whether a decree of foreclosure should be reformed so as to include lands not embraced therein, and it was decided that a mortgagee who purchased real estate sold at judicial sale to satisfy the decree foreclosing his mortgage was not entitled to have the foreclosure decree and sheriff’s deed reformed so as to include therein lands not adjudged by the foreclosure decree to be subject to the lien of the mortgage. Incidentally it was said in the opinion that á debtor’s homestead exemption is limited in quantity to two contiguous lots in an incorporated city, town or village; if outside such corporation, 160 acres of land; and in either case in value to $2,000; and that a money judgment of the district court becomes a lien upon all of the lands of the debtor in the county, at least from the date of its rendition; and a mortgage executed upon such lands thereafter will not invest the mortgagee with a lien superior to the judgment for anything more than the debtor’s homestead interest.

In Horbach v. Smiley, supra, it was held that under the homestead law of 1867 a judgment is a lien on the homestead, but that such lien cannot be enforced by execution so long as the premises ai’e owned and occupied by a judgment debtor; but that the existing homestead act exempts from forced sale upon execution or attachment a homestead not exceeding, in value $2,000; and a judgment, while the premises are impressed Avith the homestead character, is not a lien thereon, even after their sale and abandonment by the debtor; that under the present homestead law a judgment is a lien merely on the debtor’s interest in lands occupied as á homestead in excess of $2,000. While in Brown v. Campbell, supra, it was held that the head of a family has a homestead right of the value of $2,000 in 160 acres of land owned and occupied by him as a homestead, which is not the subject of fraudulent alienation; that a conveyance of such homestead right will not be set aside as having been made in fraud of creditors. It was further held that, if there was a surplus in excess of the sum of $2,000 within the homestead limits, a conveyance of such surplus can be set aside when made in fraud of creditors.

So it appears that the direct question involved in this controversy did not arise in any of the foregoing cases. On the other hand it is provided by section 1, chapter 36, Compiled Statutes, 1903 (Ann. St. 6200) :

“A. homestead not exceeding in value $2,000, consisting of the dwelling house in which the claimant resides, and its appurtenances, and the land on which the same is situated, no.t exceeding 160 acres of land, to be selected by the owner thereof, and not in any incorporated city or village, or instead thereof, at the option of the claimant, a quantity of contiguous land not exceeding two lots within any incorporated city or village, * * * shall be exempt from judgment liens and from execution or forced sale.”

The effect of this section is to preserve to the head of a family a homestead, not exceeding 160 acres of land, or two contiguous lots in any incorporated city or village, not exceeding in value $2,000, clear and free of judgment liens, and all other liens and incumbrances, unless placed thereon by the joint act of the husband and wife. Construing this act it was held in Hoy v. Anderson, 39 Neb. 386, that the extent of a homestead is not to be determined from the fee simple value of the land, but from the value of the homestead claimant’s interest therein. It appeared in that case that Anderson owned 160 acres of land in this state of the value of $2,800, upon which he resided with his family as a homestead; there was a valid mortgage on the premises to secure the payment of 1,200; subsequently to the giving of the mortgage, but while the land was occupied as a homestead, two judgments were obtained against Anderson, transcripts of which were duly filed in the district court for the county in which the real estate was situated. On these facts, the court said:

“Applying the foregoing considerations to the case before us, it is clear that Anderson’s interest in the land cannot be reached by an ordinary execution. The total value of the quarter section is but $2,800, and deducting therefrom $1,200, the amount of the mortgage, leaves Anderson’s interest less than $2,000. It follows that the transcripted judgments are not liens upon the real estate. * * * To hold otherwise would be against the spirit, if not the very letter, of our homestead law.”

It was further held in effect that, in case Anderson should convey the property to another, in that event the judgments could not be satisfied out of it because Anderson’s grantee, taking the land in the then existing conditions, would hold it free and clear of judgment liens. In Munson v. Carter, 40 Neb. 417, it appeared that a homestead, which was exempt at and before the rendition of a judgment, was by mesne conveyances transferred from the judgment debtor to his wife. And it was held that the right of the wife to assert such homestead exemption was in no way affected by fraudulent intent with which either of the conveyances was given or received. In Smith v. Neufeld, 57 Neb. 660, this court held that one rightfully in the possession of a homestead can maintain an action for the removal of the apparent lien of a judgment therefrom, on the theory that such lien, though only apparent, is a cloud upon his title. In Mundt v. Hayedorn, 49 Neb. 409, it was decided that our homestead act exempts to those persons within its provisions a homestead not exceeding $2,000 in value over and above incumbrances, and that the exemption in such a case is determined, not from the value of the fee simple title, but from the value of the claimant’s interest in the premises. The foregoing decisions have been often approved and followed by us, and the principles announced therein have become a rule of property and the settled law of this state.

Applying the foregoing rules, if a debtor has a right, so long as his homestead interest is within the statutory limits, to transfer the homestead absolutely unincumbered by judgments that may be of record against him, he would have the right to execute mortgages on his homestead for the purpose of taking up and paying off prior existing mortgages which would be superior to any judgments against him, and the lien of such new mortgages would be in no way impaired thereby. The evidence in the case at bar clearly shows that the value of the defendants’ homestead interests in the promises at no time since they purchased the property has approached the statutory limit; so, when the mortgages in question herein were executed thereon, they had a right to so incumber the homestead without regard to. the plaintiff’s judgment. Perhaps the reason of this rule, as heretofore stated, may not be entirely satisfactory to us, but the rule itself has been settled and established by such a long line of decisions that we do not feel at liberty at this time to change it. We conceive, however, that the principle on which these decisions rest is that the present homestead act expressly provides that a judgment shall not be a lien on the homestead of the judgment debtor; that is to say, it is not a lien on the land comprising such homestead so long as its extent is less than 160 acres of land, or two contiguous lots situated in an incorporated city or village, and his interest therein dot's not exceed the sum of $2,000. If a judgment is not a lien on the land embraced in the homestead of the judgment debtor, it, of course, is not a lien on his homestead interest therein.

Prom the statement of the facts in this case it appears that the mortgages which the plaintiff claims are now subsequent and inferior to the lien of his judgment were executed and placed on record at a time Avhen the defendants’ interests in the homestead Avere less than $2,000, and at a time AAdien no execution had been issued, and no attempt made to levy an execution upon the homestead. So there was no point of time Avhen the plaintiff’s judgment could or did become a lien on the land, and there neArer was any excess Avhich could in any manner be impressed with such a lien. Such being the conditions when the execution in question herein Avas issued and levied, there Avas nothing upon which a lien could be impressed, and the trial court could in its discretion refuse to make the needless expense of appraising the interests of the defendants in the premises.

For the foregoing reasons, Ave are satisfied that our former opinion is right, and the plaintiff’s motion for - a rehearing is therefore

Overruled.  