POBRESLO V. JOSEPH M. BOYD CO.

• Decision Date: 09 January 1933
• Court: U.S. Supreme Court

Pobreslo v. Joseph M. Boyd Co.

No. 171

Argued December 13, 1932

Decided January 9, 1933

287 U.S. 518

APPEAL FROM THE SUPREME COURT OF WISCONSIN

Syllabus

1. Voluntary assignments for the benefit of creditors are not inconsistent with the purposes of the federal Bankruptcy Act, though

Page 287 U. S. 519

subject to be set aside under it by timely petition of creditors. P. 526.

2. Statutory provisions in Wisconsin regulating voluntary assignments for the ratable benefit of all creditors of the assignor, and forbidding that any creditor gain priority by attachment or garnishment, but not providing for discharge of the assignor or requiring his release by creditors who would participate in the distribution, held not in conflict with the Bankruptcy Act. International Shoe Co. v. Pinkus, 278 U. S. 261, distinguished. P P. 523-525.

210 Wis. 20, 242 N.W. 725, affirmed.

Appeal from a judgment upholding an assignment for the benefit of creditors and directing the dismissal of a garnishment proceeding brought by a nonassenting creditor.

Page 287 U. S. 521

MR. JUSTICE BUTLER delivered the opinion of the Court.

Chapter 128 of the Wisconsin Statutes, 1929, regulates and controls voluntary assignments for the benefit of creditors and also contains provisions relating to the discharge of insolvent debtors. By this appeal, we are called on to decide whether, as construed below, the provisions of that chapter which relate to voluntary assignments for the benefit of creditors, and especially a clause contained in § 128.06, conflict with the National Bankruptcy Act. The clause declares:

"No creditor shall, in any case where a debtor has made or attempted to make an assignment for the benefit of creditors, or in case of the insolvency of any debtor, by attachment, garnishment or otherwise, obtain priority over other creditors upon such assignment being

Page 287 U. S. 522

for any reason adjudged void, or in consequence of any sale, lien or security being adjudged void. ^* "

Page 287 U. S. 523

The Boyd Company, a Wisconsin corporation, March 23, 1931, made a voluntary assignment of all its property to assignees for the benefit of its creditors. They immediately took possession, and the Circuit Court of Dane county, on the same day, assumed jurisdiction, declaring in its order that it did so pursuant to c. 128. Appellant, a nonassenting creditor, brought suit against the assignor and prayed judgment for more than ,500. September 1, 1931, she instituted garnishment proceedings against the assignees, asserting that the assignment was void because of failure to comply with c. 128 in several particulars, and because that chapter was repugnant to the Bankruptcy Act. Thereafter, the assignor amended the assignment to authorize the judge of the circuit court, in case of resignation of the assignees, to appoint a trustee. The assignees resigned, and the court appointed appellee Samp as sole trustee. He answered the garnishment and admitted that he had the property conveyed by the assignment, but denied that he had possession or control of any property in which the assignor had an interest. Appellant, having recovered judgment against the assignor for ,645, moved for judgment against the garnishees. The court found that the assignees had received property belonging to the assignor in excess of appellant's judgment, and had transferred the same to the trustee, and ordered that it be applied to satisfy the judgment. The supreme court reversed, and directed that the garnishee action be dismissed. 242 N.W. 725.

In view of the construction theretofore put upon c. 128 by the state supreme court, it is evident that the assignment did not have the effect of instituting proceedings contemplating discharge of assignor from its debts.

In Voluntary Assignment of Tarnowski, 191 Wis. 279, 210 N.W. 836, the supreme court declared that, as to all matters comprehended within the Bankruptcy

Page 287 U. S. 524

Act, the state insolvency laws had been by it completely superseded, and said (p. 283):

"The statutes of this state relating to the subject of bankruptcy are suspended during the existence of the federal Bankruptcy Act, and . . . such statutes afford the courts of this state no power or authority to discharge debtors from their debts."

In Hazelwood v. Olinger Building Department Stores, 205 Wis. 85, 236 N.W. 591, 592, the court pointed out that the Wisconsin statute under consideration is essentially different from the Arkansas statute before us in International Shoe Co. v. Pinkus, 278 U. S. 261, and, speaking through Chief Justice Rosenberry, said:

"In the matter of Voluntary Assignment of Tarnowski, . . . it was held that the right to make a voluntary assignment for the benefit of creditors is a personal right inherent in the ownership of property, and existed at common law independent of the statute; that, while the discharge of a bankrupt from his debts constitutes the very essence of the Bankruptcy Law, the discharge of a debtor is no part of an assignment law, that part of the chapter relating to discharge is entirely superseded by the federal act, and has, under present conditions, no efficacy; and, further, that a creditor filing his claim and accepting his pro rata share of the proceeds under a voluntary assignment does not waive his right to object to the debtor's discharge. As a condition of filing a claim under the Arkansas statute, the creditor was required to agree that payment of a pro rata share of the assets of the insolvent's estate should discharge his claim. It is hardly necessary to point out the wide difference between the statute of Arkansas and that of Wisconsin as construed by this court."

In the case at bar, the court again declared that the provisions in c. 128 that apply to such voluntary assignments are severable from those that relate to the discharge of insolvent debtors. It reiterated that the federal

Page 287 U. S. 525

Act superseded the latter. And it held that, as there was an attempt to make an assignment for the benefit of creditors, the quoted clause of § 128.06 prevented garnishment, even though the assignees had failed to follow some of the procedural details prescribed by c. 128.

There is slight need to refer more specifically to the differences between this case and International Shoe Co. v. Pinkus, supra. There, the proceedings in the chancery court were under the state insolvency law (Crawford & Moses' Dig., §§ 5885-5893), and not under the law governing voluntary assignments for the benefit of creditors. Id., §§ 486-493. Upon the entry of the shoe company's...