In re Tarnowski

• Decision Date: 09 November 1926
• Citation: 191 Wis. 279,210 N.W. 836
• Parties: IN RE TARNOWSKI. APPEAL OF INTERNATIONAL SHOE CO.
• Court: Wisconsin Supreme Court

191 Wis. 279

210 N.W. 836

IN RE TARNOWSKI.

APPEAL OF INTERNATIONAL SHOE CO.

Supreme Court of Wisconsin.

Nov. 9, 1926.

Appeal from Circuit Court, Milwaukee County; John J. Gregory, Judge.

In the matter of the voluntary assignment of Stanley Tarnowski for the benefit of his creditors, wherein the International Shoe Company objected to his discharge. From an order discharging the debtor, the objecting creditor appeals. Reversed.--[By Editorial Staff.]Bloodgood, Kemper & Bloodgood, of Milwaukee (Albert K. Stebbins, of Milwaukee, of counsel), for appellant.

William J. Morgan, of Milwaukee (Morgan, La France & Rothman, of Milwaukee, of counsel), for respondent.

Herman L. Ekern, Atty. Gen., and Franklin E. Bump, Asst. Atty. Gen., for the State.

OWEN, J.

The question presented by this appeal is whether the courts of this state have power to discharge a bankrupt or insolvent debtor from his debts. It appears that one Stanley Tarnowski executed and delivered his certain voluntary assignment, or deed of trust, under the provisions of chapter 128, Stats., to one Paul G. Ballentine, which said assignment was duly filed with the clerk of the circuit court for Milwaukee county, and thereafter the estate of said debtor was in all respects duly administered, in compliance with the provisions of said chapter. The appellant, who was a creditor of said Tarnowski, duly filed his claim against said debtor, and accepted and received its pro rata dividend arising from the administration of the estate. In due course the debtor made application for his discharge under the provisions of section 128.25, Stats. The appellant filed objections to such discharge on the ground that the provisions of the Wisconsin Statutes providing for the discharge of bankrupt debtors have been superseded by the national Bankruptcy Act (U. S. Comp. St. §§ 9585-9656), and that the circuit court for Milwaukee county had no power, jurisdiction, or authority to discharge said debtor from his debts. From the order made by the court discharging the debtor, the appellant appeals.

[1] Although the federal Bankruptcy Act has been in existence for more than a quarter of a century, our attention has been called to no case in which the exact question here presented has been decided. It has been many times held that the federal Bankruptcy Act operates to suspend state insolvent laws, but in all such cases the question has been raised pendente the insolvency proceedings in the state courts and within the time under which a general assignment for the benefit of creditors constituted an act of bankruptcy under the provisions of the federal Bankruptcy Act. Mauran v. Crown Carpet Lining Co., 23 R. I. 324, 50 A. 331;R. H. Herron Co. v. Superior Court, 136 Cal. 279, 68 P. 814, 89 Am. St. Rep. 124;Westcott v. Berry, 69 N. H. 505, 45 A. 352;Parmenter Mfg. Co. v. H. Warren Hamilton, 172 Mass, 178, 51 N. E. 529, 70 Am. St. Rep. 258;Singer v. National Bedstead Mfg. Co., 65 N. J. Eq. 290, 55 A. 868;In re Smith (D. C.) 92 F. 135. In all of these cases it was said in effect, if not expressly, that the federal Bankruptcy Law constitutes the supreme law of the land upon the subject, so far as it is embraced within the federal legislation, and that all state laws relating to bankruptcy, so far as they touch the field covered by the federal legislation, were superseded by the federal Bankruptcy Act and are suspended during the period of its existence. The soundness of these declarations can scarcely be questioned, and the fact that we have before us the question raised after, rather than prior, to the attempted discharge of the bankrupt, cannot affect the status of the state law. That is either in force or it is not. It cannot be in force under one set of circumstances and not in force under other conditions. It cannot be the law that a state court has power to discharge a bankrupt from his debts when its proceedings in the administration of the estate are not interfered with by federal courts, but that such power is lost when a federal court takes over the administration of the estate. We think it clear enough that the insolvent laws of this state are completely superseded by the federal Bankruptcy Act as to all matters comprehended within that legislation.

[2][3] By section 8, art. 1, of the federal Constitution it is provided that “the Congress shall have power * * * (4) to establish * * * uniform laws on the subject of bankruptcies throughout the United States.” This is a power which Congress may or may not exercise, as it sees fit and until such power is exercised, under well-settled principles the states may legislate upon the subject. When, however, Congress has legislated and by its legislation indicated its purpose to cover the entire field, the power of the state Legislature upon the subject ceases. Sturges v. Crowninshield, 17 U. S. (4 Wheat.) 122, 4 L. Ed. 529. Every court dealing with this subject holds that such exclusive purpose on the part of Congress is apparent from the act (30 Stat. c. 541) which provides that--

“This act shall go into full force and effect upon its passage: Provided, however, that no petition for voluntary bankruptcy shall be filed within one month of the passage thereof, and no petition for involuntary bankruptcy shall be filed within four months of the passage thereof. Proceedings commenced under state insolvency laws before the passage of this act shall not be affected by it.”

The clause which preserves unaffected proceedings commenced under state insolvency laws before the passage of the act is held to be a plain indication that all other proceedings are affected by the act. There seems to be little room to doubt that, to quote the Massachusetts court, “the rights of all persons, in the particulars to which the act refers, are to be determined by the act from the time of its passage.” Parmenter Mfg. Co. v. H. Warren Hamilton, 172 Mass. 178, 51 N. E. 529, 70 Am. St. Rep. 258. We conclude, therefore, that the statutes of this state relating to the subject of bankruptcy are suspended during the existence of the federal Bankruptcy Act, and that such statutes afford the courts of this state no power or authority to discharge debtors from their debts.

[4] But the further point is made by the respondent that the appellant, having acquiesced in these proceedings, having filed his claim and participated in the dividends realized from an administration of the estate, is not in a position to object to the discharge of the debtor. It is a general principle that one may not enjoy the benefits and privileges of a statute and, after so doing, escape its burdens by attacking its validity. Booth Fisheries v. Industrial Commission, 185 Wis. 127, 200 N. W. 775;Id., 46 S. Ct. 491, 70 L. Ed. 908;Daniels v. Tearney, 102 U. S. 415, 26 L. Ed. 187;Grand Rapids, etc., Ry. v. Osborn, 193 U. S. 17, 24 S. Ct. 310, 48 L. Ed. 598;Pera v. Shorewood, 176 Wis. 261, 186 N. W. 623. “To do so,” as said in Pera v. Shorewood, page 264 (186 N. W. 624), “would enable parties to make use of a statute as a valid one during one stage of an action, and then, upon a certain point therein being reached, continue it upon the basis that it is invalid because from thence on it seems to be more advantageous to claim its validity.” To this appellant responds that it is not attacking any feature of the law under which the estate of this debtor was administered and the proceeds distributed among the creditors. He points out that the statutory provisions under which the estate was administered up to the point of distribution are mere regulations of voluntary assignments for the benefit of creditors; that these statutory regulations are separate and distinct from the further provisions of our statutes providing for the discharge of the...