International Shoe Co v. Pinkus, 12

• Decision Date: 02 January 1929
• Docket Number: No. 12,12
• Citation: 278 U.S. 261,49 S.Ct. 108,73 L.Ed. 318
• Parties: INTERNATIONAL SHOE CO. v. PINKUS et al. Re
• Court: U.S. Supreme Court

278 U.S. 261

49 S.Ct. 108

73 L.Ed. 318

INTERNATIONAL SHOE CO.

v PINKUS et al.

No. 12.

Reargued and Submitted Oct. 22, 1928.

Decided Jan. 2, 1929.

Messrs. J. D. Williamson, of St. Louis, Mo., and O. C. Burnside and W. G. Streett, both of Lake Village, Ark., for plaintiff in error.

Mr. Lamar Williamson, of Monticello, Ark., for defendants in error.

Mr. Justice BUTLER delivered the opinion of the Court.

On an action in the common pleas court of Chicot county, Arkansas, August 24, 1925, plaintiff in error obtained judgment against Pinkus for $463.43. The debtor was an insolvent merchant doing business in that county. He had 46 creditors; his debts amounted to more than $10,000, and his assets were less than $3,000. On the day judgment was entered, the insolvent, invoking chapter 93 of Crawford & Moses' Digest, commenced a suit in the chancery court of that county, praying to be adjudged insolvent and for the appointment of a receiver to take and distribute his property as directed by that statute. On the same day, the court adjudged him insolvent and appointed a receiver, with directions to take the property and liquidate it and direct creditors to make proof of their claims 'with the necessary stipulation that they will participate in the proceeds in full satisfaction of their demands.' And, in pursuance of the statute, the court ordered the receiver, after the expiration of 90 days, first to pay costs, next salaries earned within 90 days, then 'the claims of those who have duly filed their claims with the above stipulation, if enough funds are in your hands to pay the same, and lastly * * * to pay any and all other claims of creditors, or so much as the funds * * * will pay, all creditors of the same class receiving an equal percentage of the funds.' The receiver sold the property for $2,659, and gave Pinkus $500 as his exemption. The court allowed $250 as compensation for the receiver.

November 18, 1925, plaintiff in error caused execution to issue for collection of the judgment. The sheriff, being unable to find property on which to levy, returned the writ unsatisfied. Thereupon plaintiff in error brought this suit. The complaint alleged the facts aforesaid, asserted that chapter 93 had been superseded and suspended by the passage of the Bankruptcy Act (11 USCA), and prayed that the judgment be paid out of the funds in the hands of the receiver. The chancery court overruled the contention, held that the complaint failed to state a cause of action, and dismissed the case. Its judgment was affirmed by the highest court of the state. 173 Ark. 316, 292 S. W. 996. The case is here under section 237(a), Judicial Code (28 USCA § 344(a).

The question is whether, in the absence of proceedings under the Bankruptcy Act, what was done in the chancery court protects the property in the hands of the receiver from seizure to pay the judgment held by plaintiff in error.

A state is without power to make or enforce any law governing bankruptcies that impairs the obligation of contracts or extends to persons or property outside its jurisdiction or conflicts with the national bankruptcy laws. Sturges v. Crowninshield, 4 Wheat. 122, 4 L. Ed. 529; Ogden v. Saunders, 12 Wheat. 213, 369, 6 L. Ed. 606; Baldwin v. Hale, 1 Wall, 223, 228, et seq., 17 L. Ed. 531; Gilman v. Lockwood, 4 Wall. 409, 18 L. Ed. 432; Denny v. Bennett, 128 U. S. 489, 497, 498, 9 S. Ct. 134, 32 L. Ed. 491; Brown v. Smart, 145 U. S. 454, 457, 12 S. Ct. 958, 36 L. Ed. 773; Stellwagen v. Clum, 245 U. S. 605, 613, 38 S. Ct. 215, 62 L. Ed. 507.

The Arkansas statute is an insolvency law. It is so designated in its title (Acts of Arkansas 1897) and in the revision (chapter 93, supra). The Supreme Court of the state treats it as such. Hickman v. Parlin-Orendorff Co., 88 Ark. 519, 115 S. W. 371; Baxter County Bank v. Copeland, 114 Ark. 316, 322, 169 S. W. 1180; Morgan v. State, 154 Ark. 273, 279, 281, 242 S. W. 384; this case, 173 Ark. 316, 292 S. W. 996; Friedman & Sons v. Hogins, 175 Ark. 599, 299 S. W. 997. It provides for surrender by insolvent of all his unexempt property (section 5885) to be liquidated by a trustee for the payment of debts under the direction of the court. It classifies creditors, prescribes the order of payment of their claims and gives preference to those fully discharging the debtor in consideration of pro rata distribution (section 5888). Mayer v. Hellman, 91 U. S. 496, 502, 23 L. Ed. 377; Stellwagen v. Clum, supra; Segnitz v. Garden City Co., 107 Wis. 171, 83 N. W. 327, 50 L. R. A. 327, 81 Am. St. Rep. 830; In re Weedman Stave Co. (D. C.) 199 F. 948, and cases cited.

The state enactment operates within the field occupied by the Bankruptcy Act. The insolvency of Pinkus was covered by its provisions. He could have filed a voluntary petition. His application to the state court for the appointment of a receiver was an act of bankruptcy, section 3(a), U. S. C. tit. 11, § 21(a); 11 USCA § 21(a); and, at any time within four months thereafter, three or more creditors having claims amounting to $500 or over could have filed an involuntary petition, section 59(b), U. S. C. tit. 11, § 95(b); 11 USCA § 95(b). We accept the statement made in the brief submitted on hehalf of Pinkus that he had been discharged in voluntary proceedings within six years prior to the filing of the petition in the chancery court. Therefore he could not have obtained discharge under Bankruptcy Act, § 14, U. S. C. tit. 11, § 32 (11 USCA § 32), and, in proceedings under that act, all his creditors would have been entitled to participate in distribution without releasing the insolvent as to unpaid balances.

The power of Congress to establish uniform laws on the subject of bankruptcies throughout the United States is unrestricted and paramount. Constitution, art. 1, § 8, cl. 4. The purpose to exclude state action for the discharge of insolvent debtors may be manifested without specific declaration to that end; that which is clearly implied is of equal force as that which is expressed. New York Central R. R. Co. v. Winfield, 244 U. S. 147, 150, et seq., 37 S. Ct. 546, 61 L. Ed. 1045, L. R. A. 1918C, 439, Ann. Cas. 1917D, 1139; Erie R. R. Co. v. Winfield, 244 U. S. 170, 37 S. Ct. 556, 61 L. Ed. 1057, Ann. Cas. 1918B, 662; Savage v. Jones, 225 U. S. 501, 533, 32 S. Ct. 175, 56 L. Ed. 1182. The general rule is that an intention wholly to exclude state action will not be implied unless, when fairly interpreted, an act of Congress is plainly in conflict with state regulation of the same subject. Savage v. Jones, supra; Illinois Central R. R. Co. v. Public Utilities Commission, 245 U. S. 493, 510, 38 S. Ct. 170, 62 L. Ed. 425; Merchants Exchange v. Missouri, 248 U. S. 365, 39 S. Ct. 114, 63 L. Ed. 300. In respect of bankruptcies the intention of Congress is plain. The national purpose to establish uniformity necessarily excludes state regulation. It is apparent, without comparison in detail of the provisions of the Bankruptcy Act with those of the Arkansas statute, that intolerable inconsistencies and confusion would result if that insolvency law be given effect while the national act is in force. Congress did not intend to give insolvent debtors seeking discharge, or their creditors seeking to collect claims, choice between the relief provided by the Bankruptcy Act and that specified in state insolvency laws. States may not pass or enforce laws to interfere with or complement the Bankruptcy Act or to provide additional or auxiliary regulations. Prigg v. Pennsylvania, 16 Pet. 539, 617, 618, 10 L. Ed. 1060; Northern Pacific Railway v. Washington, 222 U. S. 370, 378, et seq., 32 S. Ct. 160, 56 L. Ed. 237; St. Louis, Iron Mt. & S. Ry. v. Edwards, 227 U. S. 265, 33 S. Ct. 262, 57 L. Ed. 506; Erie R. R. Co. v. New York, 233 U. S. 671, 681, et seq., 34 S. Ct. 756, 58 L. Ed. 1149, 52 L. R. A. (N. S.) 266; New York Central R. R. Co. v. Winfield, supra; Erie R. R. Co. v. Winfield, supra; Oregon-Washington Co. v. Washington, 270 U. S. 87, 101, 46 S. Ct. 279, 70 L. Ed. 482.

It is clear that the provisions of the Arkansas law governing the distribution of property of insolvents for the payment of their debts and providing for their discharge or that otherwise relate to the subject of bankruptcies are within the field entered by Congress when it passed the Bankruptcy Act, and therefore such provisions must be held to have been superseded. In Boese v. King, 108 U. S. 379, 385, 2 S. Ct. 765, 769 (27 L. Ed. 760), this court, referring to the effect of the...