Star v. Johnson

• Decision Date: 31 October 1931
• Docket Number: No. 11087.,11087.
• Citation: 44 S.W.2d 429
• Parties: STAR v. JOHNSON et al.
• Court: Texas Court of Appeals

44 S.W.2d 429

STAR v. JOHNSON et al.

No. 11087.

Court of Civil Appeals of Texas. Dallas.

October 31, 1931.

Rehearing Denied November 28, 1931.

Appeal from Grayson County Court; A. S. Noble, Judge.

Garnishment proceeding by Helen C. Johnson and others against Arthur Star. From an adverse judgment, Arthur Star appeals.

Reversed and rendered.

William Andress, Jr., and Renfro, Ledbetter & McCombs, all of Dallas, for appellant.

C. Huggins, of Sherman, for appellees.

LOONEY, J.

The question for decision is whether the Assignment for Creditors Act, title 12, R. S. 1925 (articles 261-274), was suspended by the National Bankruptcy Law (11 USCA), and arose as follows: Appellees, judgment creditors of the Dallas Show Case & Manufacturing Company, a corporation, caused a writ of garnishment to be served on Arthur Star, its assignee, under a general assignment for the benefit of creditors. The garnishee answered, denying that he was personally amenable to the writ, but alleged that on March 13, 1931, the Dallas Show Case & Manufacturing Company assigned to him all its assets for the benefit of creditors, that he took possession of said assets, converted same into cash, to wit, the sum of $582.63, which was in his possession at the time the writ was served. He denied that the judgment debtor owned this money, but that same belonged to him, as assignee for the benefit of creditors, and was being held by him in trust for such purpose, hence the fund was not subject to garnishment at the suit of appellees. He therefore prayed for discharge with an allowance of $30 for costs and attorney's fee. Judgment went against appellant in the justice court on his answer; the case was appealed to the county court, and submitted on an agreed statement, which included the salient facts set out above, the transcript of the justice court record, and the answer of garnishee, which was not contested.

The court concluded, as a matter of law, that the Assignment for Creditors Act was suspended by the National Bankruptcy Law, that title to the assets of the corporation did not pass to appellant by the assignment, hence the proceeds thereof were held by him as agent for assignor, and were garnishable at the suit of appellees. The questions discussed are properly presented for consideration.

We think the construction given the Assignment for Creditors Act, in its relation to the Bankruptcy Law of Congress, by our Supreme Court in Patty-Joiner v. Cummins, 93 Tex. 598, 57 S. W. 566, announced the doctrine that is decisive of this controversy. The court, answering certified questions, held that the provision of the assignment statute requiring the creditor to release any part of his claim was suspended by the Bankruptcy Act, but as the assignment under consideration conveyed the debtor's property for the equal benefit of all accepting creditors, it was otherwise valid, except as against bankruptcy proceedings taken within four months. The court also held that the assignee was not subject to garnishment at the suit of a nonconsenting creditor.

In the case of Haijek v. Luck, 96 Tex. 517, 519, 74 S. W. 305, the Supreme Court had occasion to restate its holding in the Patty-Joiner-Cummins Case, as follows: "The case of Patty-Joiner & Eubank Co. v. Cummins, 93 Tex. 598, 57 S. W. 566, referred to in the certificate, determines two questions: First, that an assignment made under the assignment law of this state which does not exact releases, though subject to be set aside by proceedings in bankruptcy seasonably instituted, was not otherwise void; and, second, that even such an assignment, which is made for the benefit of such creditors only as should accept under it and release the assignor from further liability, operated a transfer of the property, and that it was not subject in the hands of the assignee to a writ of garnishment by a nonaccepting creditor. * * *"

In the Patty-Joiner-Cummins Case, the Supreme Court cited Mayer v. Hellman, 91 U. S. 496, 23 L. Ed. 377, and Boese v. King, 108 U. S. 379, 2 S. Ct. 765, 27 L. Ed. 760. In the Mayer-Hellman Case, the court held, opinion by Judge Field, that an assignment by an insolvent debtor of his property to trustees for the equal and common benefit of all his creditors was not fraudulent, and, when executed six months before proceedings in bankruptcy taken against the debtor (under the act of 1867), was not assailable by the assignee in bankruptcy subsequently appointed. In Boese v. King, the court held, opinion by Judge Harlan, that, under the Bankruptcy Act of 1867 (14 Stat. 517), an assignment of one's property, to be equally distributed among his creditors under a state statute, was an act of bankruptcy for which, under proper proceedings, he could be adjudged a bankrupt, and the property wrested from his assignees for administration in the bankruptcy court, but except as against such proceedings, an assignment for the benefit of creditors without intent to hinder, delay, or defraud creditors, was valid, at least for the purpose of securing an equal distribution of the estate among creditors, and that the assignees could hold the proceeds of such property, deposited by them in another state, against a receiver of the debtor's property appointed in that state. Judge Holmes, in Randolph v. Scruggs, 190 U. S. 533, 537, 23 S. Ct. 710, 712, 47 L. Ed. 1170, said: "The assignment was not illegal. It was permitted by the law of the state, and cannot be taken to have been prohibited by the bankruptcy law absolutely in every event, whether proceedings were instituted or not. Re Sievers [D. C.] 91 F. 366; Re Romanow [D. C.] 92 F. 510. It had no general fraudulent intent. It was voidable only in case bankruptcy proceedings should be begun. At the time when it was made the institution of such proceedings was uncertain. It seems to us that it would be a hard and subtle construction to say, as seems to have been thought in Bartlett v. Bramhall, 3 Gray [Mass.] 257, 260, that when they were instituted they not only avoided the assignment, but made it illegal by relation back to its date, when, if they had not been started, it would have remained perfectly good." The same doctrine was announced in Stellwagen v. Clum, 245 U. S. 612, 615, 38 S. Ct. 215, 62 L. Ed. 507, 511.

The opinions of these great judges who spoke for the Supreme Court in the cases just mentioned, wherein they held that state laws, in all material respects the same as ours, were not suspended by the National Bankruptcy Act, ought to be considered ample federal authority for the holding of our Supreme Court in the Patty-Joiner-Cummins Case.

The soundness of the rule announced by our Supreme Court, in the Patty-Joiner-Cummins Case, remained unchallenged until the Texarkana Court held differently in Johnson v. Chapman Milling Co. (Tex. Civ. App.) 37 S. W.(2d) 776. The facts involved in the Johnson-Chapman Case are analogous to the facts in the Patty-Joiner-Cummins Case, as well as to the facts involved in the case at bar; in other words, the facts of each of these cases invoke the same rule of decision. The Texarkana court based its decision on International Shoe Co. v. Pinkus, 278 U. S. 261, 49 S. Ct. 108, 110, 73 L. Ed. 318, as controlling authority.

While we have the highest respect for the opinions of the able and experienced judges who compose the Texarkana court, we are constrained, after careful consideration, to the view that their decision is incorrect. The Pinkus Case announced no new rule of law; on the contrary, it is entirely consistent with the line of decisions to which it properly belongs. The court was there dealing with a case that arose under a statute of Arkansas, held at the outset to be an insolvency law. The court said: "The Arkansas statute is an insolvency law. It is so designated in its title (Acts of Arkansas 1897) and in the revision. * * * The Supreme Court of the state treats it as such." In the course of the discussion, the court distinguished the case from Boese v. King, one of the cases cited as an authority by our Supreme Court in Patty-Joiner-Cummins, and on this phase said: "His [Pinkus] purpose was to delay plaintiff in error and to secure full releases as provided by the statute. The state court [173 Ark. 316, 292 S. W. 996] did not treat the proceedings under the state law as a transfer of insolvent's...