John O. England, Trustee of the Estate of Daniel E. Sanderson, Bankrupt v. Daniel E. Sanderson, Bankrupt

Appellee Sanderson was adjudged a bankrupt on April 13, 1954, pursuant to a voluntary petition theretofore filed. Appellant England has been elected trustee.

On February 26, 1954, Sanderson, hereafter “bankrupt,” filed a declaration of homestead pursuant to California law.

We are here concerned with the question of whether the bankrupt is entitled to an exemption of $12,500, the amount stated in Calif.Civ.C. § 1260 in force and effect at the time of filing his petition; or whether the exemption should be limited to $7,500, the amount allowed under California law at the time he became indebted to several of his creditors. For the purpose of clarity we will refer to those creditors in existence before the amendment to the exemption law as “preexisting creditors” and to those creditors that came into existence after the amendment as “subsequent creditors.”

The trustee allowed an exemption of $7,500. The Referee disagreed and allowed an exemption of $12,500. The District Court sustained the Referee. The California courts have construed § 1260 as having only a prospective effect in that creditors whose debts arose prior to the amendment would have the benefit of the lower…