245 U.S. 605 (1918), 89, Stellwager v. Clum

Docket Nº:No. 89
Citation:245 U.S. 605, 38 S.Ct. 215, 62 L.Ed. 507
Party Name:Stellwager v. Clum
Case Date:February 04, 1918
Court:United States Supreme Court

Page 605

245 U.S. 605 (1918)

38 S.Ct. 215, 62 L.Ed. 507

Stellwager

v.

Clum

No. 89

United States Supreme Court

Feb. 4, 1918

Argued December 14, 1917

CERTIFICATE FROM THE CIRCUIT COURT OF APPEALS

FOR THE SIXTH CIRCUIT

Syllabus

The Bankruptcy Act as it was on the dates herein mentioned (February 2, 1910, November 9, 1910) did not operate to suspend § 6343 of the Revised Statutes of Ohio as it stood February 2, 1910, or the sections into which that section was divided and numbered by the General Code of Ohio, approved February 15, 1910, viz: §§ 11102-11105, as such sections existed May 5, 1910.

Page 606

The Ohio law, supra (part of a chapter concerning insolvent debtors), provides, among other things, that any transfer made by a debtor to prefer creditors, or with intent to hinder, delay or defraud them, shall, if the transferee knew of such fraudulent intent, be declared void at the suit of any creditor or creditors, and that a receiver may thereupon be appointed to take charge of all the debtor's assets, including the property so transferred, and administer them for the equal benefit of all creditors in proportion to their respective demands. Held that such provisions are consistent with the Bankruptcy Law, and that, availing of them pursuant to § 70e of the latter, a trustee in bankruptcy proceedings, which followed within a few days of the debtor's general assignment, could administer for the creditors generally property which had been transferred by the debtor in trust for particular creditors more than four months previously.

Bankruptcy laws enacted by Congress pursuant to Article I, § 8, of the Constitution operate to suspend the laws of states only insofar as the latter laws are in conflict with the system established by the former.

In determining whether a state law is in conflict with the Bankruptcy Act, much weight is to be given the consideration that a main purpose of the act, and a prime requisite of every true bankruptcy law, is to benefit the debtor by relieving his future acquired property from the obligations of existing debts.

Although different results may ensue therefrom in different states, it is not inconsistent with the requirement of uniformity for the federal bankruptcy law to permit trustees in bankruptcy to avail themselves of state statutes intended to avoid fraudulent conveyances, and thus promote the equal distribution of insolvent estates.

Section 70-e of the Bankruptcy Act gives the trustee in bankruptcy a right to recover property transferred in violation of state law without reference to the four months' limitation; if a creditor could have avoided the transfer under the state law, the trustee may do the same.

For opinion of the circuit court of appeals in re the certification, see 218 F. 730.

The case is stated in the opinion.

Page 607

DAY, J., lead opinion

MR. JUSTICE DAY delivered the opinion of the Court.

This case is here upon certificate from the United States Circuit Court of Appeals for the Sixth Circuit. From the statement accompanying the certificate, it appears that Stellwagen, trustee for Margaret Zengerle, filed a petition in the United States district court to require the surrender and transfer to him of a quantity of white pine lumber and balance due upon a certain open account then in possession of Clum as trustee in bankruptcy of the Georgian Bay Company. The order was denied, the petition dismissed, and appeal taken to the circuit court of appeals.

The questions are whether certain provisions of the statutes of Ohio are suspended by virtue of the Bankruptcy Act of 1898. The facts upon which the questions arise, and in view of which they are to be answered, are thus stated:

The Georgian Bay Company, an Ohio corporation, was, at the time of the transactions in dispute, engaged in the wholesale and retail lumber business at Cleveland, Ohio. February 2, 1910, the company delivered to appellant's predecessor (A. L. McBean), as trustee for Margaret Zengerle and the Dime Savings Bank of Detroit, its bill of sale, describing 433,500 feet of white pine lumber then in the company's yards, and stating a total price of $14,013, crediting the trustee with certain promissory notes of the company for a like sum and payable in different amounts, to the order of Margaret Zengerle, C. M. Zengerle, agent, and the Dime Savings Bank, respectively. Neither the bill of sale nor a copy was filed with the recorder of Cuyahoga County, Ohio, but the lumber so in terms sold consisted of piles (stacked in the ordinary way) which were to be and at the time in fact were each distinctly

Page 608

marked: "Sold to A. L. McB., Agt." May 3, 1910, the company, with consent of McBean, sold this lumber and certain of its own lumber then in the yards, to Schuette & Co., of [38 S.Ct. 216] Pittsburgh. Payment was to be made by Schuette & Co., part in cash, part in notes maturing at fixed times between date of sale and the following September 10th, and the balance in cash on or before October 1st. Two days later, May 5th, the Georgian Bay Company transferred to appellant "the balance, twenty-five percent of in office value or what may show due on the 1st of October, A.D.1910, of the purchase price of the lumber" (so sold to Schuette & Co.), to secure payment in full of all moneys that should be advanced by, and "payment pro rata of all moneys" then owing to, the Dime Savings Banks, Mrs. Zengerle and C. M. Zengerle, agent, and any surplus remaining was to be returned to the company. Schuette & Co., while owing a balance of $7,500 on portions of the lumber it had received, rejected the rest; this can be identified, and is worth about $4,000. It was the transfer of this balance and the surrender of this rejected lumber that appellant sought in the court below.

October 31, 1910, the Georgian Bay Company made a general assignment for the benefit of its creditors, which was properly filed the following November 7th, and on the 9th of that month, the company was adjudicated a bankrupt. At the time, there remained due from the bankrupt to Mrs. Zengerle $7,100. C. M. Zengerle is the husband of Margaret Zengerle, and was the president of the Georgian Bay Company; the notes payable to his wife represented loans of money belonging to her, and, in negotiating those loans and in the transaction had under the bill of sale, he acted as her agent and as president of the company. The theory of the court below was that the bill of sale (February 2, 1910) was intended merely as security, and, not having been deposited in accordance with § 4150 (2 Bates' Ann. Ohio Stat. p. 2302) concerning

Page 609

chattel mortgages, was null and void; that the transfer (May 5th) of balance accruing October 1st from Schuette & Co. was made with intent to hinder and delay creditors, when, according to the laws and the rule of judicial decision of the State of Ohio, the Georgian Bay Company was insolvent, though not according to the Bankruptcy Act; that Margaret Zengerle was, through her agent, C. M. Zengerle chargeable with knowledge of such intent and insolvency, and the Savings Bank was not; that, as to Margaret Zengerle, the transfer was null and void, and so was set aside, but that the Savings Bank was entitled to be paid out of the balance of the Schuette account. No appeal was taken from the portion of the decree which allowed recovery by the Savings Bank.

The statutes of the State of Ohio in question are §§ 6343 and 6344 of the Revised Statutes of Ohio as amended April 30, 1908, 99 Ohio Laws, 241, 242. These sections were arranged under the General Code of Ohio approved February 15, 1910, wherein they appear as §§ 11102 to 11107, inclusive. (These sections are given in the certificate as they stood February 2, 1910, and are found in the margin. *)

Page 610

The claim is stated to be that § 6343, when considered in connection with the chapter concerning insolvent debtors, is suspended by the Bankruptcy Act. Reliance is had for this contention upon the following portion of § 6343, which provides:

[38 S.Ct. 217]

a receiver may be appointed who shall take charge of all the assets of such debtor or debtors, including the property so sold, conveyed, transferred, mortgaged, or assigned, which receiver shall administer all the

Page 611

assets of the debtor or debtors for the equal benefit of all the creditors of the debtor or debtors in proportion to the amount of their respective demands, including those which are unmatured.

The questions propounded are:

(a) Whether the Bankruptcy Act of the United States, in force on the dates herein mentioned, operated to suspend § 6343 of the Revised Statutes of Ohio as such section stood February 2, 1910.

(b) Whether the Bankruptcy Act operated to suspend the sections into which § 6343 was divided and numbered, February 15, 1910, by the General Code of Ohio, to-wit, §§ 11102, 11103, 11104 and 11105, as such sections existed May...

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