1. A state is without power to make or enforce any law governing
bankruptcies that impairs the obligations of contracts or extends
to persons or property outside its jurisdiction, or conflicts with
the national bankruptcy laws. P. 278 U. S.
2. The fact that an insolvent has received a discharge in
voluntary bankruptcy proceedings within six years and, under § 14
of the Bankruptcy Act, may not receive a new one does not preclude
the filing of a new voluntary petition. P. 278 U. S.
3. The plain purpose of the Bankruptcy Act to establish
uniformity necessarily excludes state regulation of the subject
matter, whether interfering with the Act or complementary,
additional or auxiliary. P. 278 U. S.
4. After plaintiff had recovered judgment on a debt, the debtor
obtained from a state court a decree adjudging him insolvent and
appointing a receiver to take and distribute his property under a
state law (Arkansas, Crawford & Moses Digest, c. 93) which
provides for surrender by an insolvent of all his unexempt property
to be liquidated by a trustee for the payment of his debts under
direction of the court, for classification of creditors and payment
of their claims in a prescribed order, and for giving preference to
those fully discharging the debtor in consideration of pro
distribution. Plaintiff, being unable to seek relief in
Page 278 U. S. 262
because its claim was under $500.00 and all other creditor had
joined in the state court proceedings, sued in that court to
satisfy the judgment from the funds held by the receiver, but was
denied relief upon the ground that the insolvency proceedings were
not in conflict with the Bankruptcy Act, as plaintiff alleged, but
were the same in effect as an assignment for the benefit of
that the state law is an insolvency law superseded
by the Bankruptcy Act, at least insofar as it relates to the
distribution of property and releasing of claims, and that
plaintiff was entitled to have its judgment paid out of the funds
in the hands of the receiver. Boese v. King, 108 U.
, distinguished. Pp. 278 U. S. 264
278 U. S.
173 Ark. 316 reversed.
Error to a decree of the Supreme Court of Arkansas affirming the
action of the Chancery Court in dismissing a bill to enforce
payment of a judgment out of funds in the hands of a receiver
appointed in a proceeding under the Arkansas insolvency law.
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.
Page 278 U. S. 263
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,
"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
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, 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 § 237(a), Judicial
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
Page 278 U. S. 264
contracts or extends to persons or property outside its
jurisdiction or conflicts with the national bankruptcy laws.
4 Wheat. 122; Ogden v.
12 Wheat. 213, 25 U. S. 369
1 Wall. 223, 68 U. S. 228
et seq.; 71 U. S.
4 Wall. 409; Denny v. Bennett, 128 U.
, 128 U. S.
-498; Brown v. Smart, 145 U.
, 145 U. S. 457
Stellwagen v. Clum, 245 U. S. 605
245 U. S.
The Arkansas statute is an insolvency law. It is so designated
in its title (Acts of Arkansas 1897) and in the revision. C. 93,
The supreme court of the state treats it as such.
Hickman v. Parlin-Orendorff Co.,
88 Ark. 519; Baxter
County Bank v. Copeland,
114 Ark. 316, 322; Morgan v.
154 Ark. 273, 279, 281; this case, 173 Ark. 316;
Friedman & Sons v. Hogins,
175 Ark. 599. It provides
for surrender by insolvent of all his unexempt property (§ 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 (§ 5888). Mayer v. Hellman, 91 U. S.
, 91 U. S. 502
Stellwagen v. Clum, supra; Segnitz v. Garden City Co.,
Wis. 171; In re Weedman Stave Co.,
199 F. 948, and cases
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, § 3(a), U.S.C. Tit. 11, § 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, § 59(b), U.S.C. Tit. 11, § 95(b). We accept
the statement made in the brief submitted on behalf 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
Page 278 U. S. 265
not have obtained discharge under Bankruptcy Act, § 14, U.S.C.
Tit. 11, § 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. I, § 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. Co. v. Winfield, 244 U.
, 244 U. S. 150
et seq.; Erie R. Co. v. Winfield, 244 U.
; Savage v. Jones, 225 U.
, 225 U. S. 533
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. Co.
v. Public Utilities Commission, 245 U.
, 245 U. S. 510
Merchants Exchange v. Missouri, 248 U.
. 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.
16 Pet. 539, 41 U. S.
-618; Northern Pacific Railway v.
Washington, 222 U. S. 370
222 U. S. 378
Page 278 U. S. 266
St. Louis, Iron Mt. & S. Ry. v. Edwards,
227 U. S. 265
Erie R. Co. v. New York, 233 U. S. 671
233 U. S.
,et seq; New York Central R. Co. v. Winfield,
supra; Erie R. Co. v. Winfield, supra; Oregon-Washington Co. v.
Washington, 270 U. S. 87
270 U. S.
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
108 U. S. 385
this Court, referring to the effect of the national act upon a
state insolvency law similar to the Arkansas statute under
"Undoubtedly the local statute was, from the date of the passage
of the Bankruptcy Act, inoperative insofar as it provided for the
discharge of the debtor from future liability to creditors who came
in under the assignment and claimed to participate in the
distribution of the proceeds of the assigned property."
And see Foley-Bean Lumber Co. v. Sawyer,
76 Minn. 118;
Parmenter Manufacturing Co. v. Hamilton,
172 Mass. 178;
In re Bruss-Ritter Co.,
90 F. 651.
In the opinion of the state supreme court, it is said that the
effect of the proceedings in the chancery court was the same as if
the insolvent had made an assignment for the benefit of his
creditors. But the property was not handed over simply for the
purpose of the payment of debts as far as it would go; it was
transferred pursuant to a statute and decree imposing conditions
intended to secure the debtor's discharge. As its claim was less
than $500, plaintiff in error could not invoke the jurisdiction of
the bankruptcy court without cooperation of other creditors. It was
shown by insolvent's petition that his property was less than
one-third of his debts. The amount remaining
Page 278 U. S. 267
after deducting his exemption and the costs was not sufficient
to pay 20 percent of the claims. All creditors except plaintiff in
error agreed fully to release insolvent in consideration of the
distribution directed by the decree. And, as their claims were much
in excess of the fund, plaintiff in error could have obtained
nothing on account of its claim without giving insolvent a full
The decision below is not supported by Boese v. King,
In that case, there was an assignment under the New
Jersey insolvency law. Some years later, creditors obtained
judgment against the assignor in New York. A receiver appointed in
supplementary proceedings sued the assignees in New York to compel
payment of the judgment out of funds they had on deposit there. The
highest court of the state denied relief, and the case was brought
here on writ of error. This Court held that the assignment was
sufficient to pass title, and, as the Bankruptcy Act had superseded
the New Jersey insolvency law, all the creditors were entitled
unconditionally to share in pro rata
receiver was held not entitled to recover because the judgment
creditors could have secured equal distribution by the institution
of bankruptcy proceedings, but instead they waited until after the
expiration of the time allowed for that purpose, and then by the
New York suit sought to obtain preference and full payment. In the
course of the opinion, it is said (p. 108 U. S.
"It can hardly be that the Court is obliged to lend its aid to
those who, neglecting or refusing to avail themselves of the
provisions of the act of Congress, seek to accomplish ends
inconsistent with that equality among creditors which those
provisions were designed to secure."
The case now before us is essentially different. Plaintiff in
error could not invoke jurisdiction of the bankruptcy court. The
insolvent commenced proceedings under the Arkansas insolvency law
on the day that judgment was
Page 278 U. S. 268
obtained against him. His purpose was to delay plaintiff in
error and to secure full releases as provided by the statute. The
state court did not treat the proceedings under the state law as a
transfer of insolvent's property for unconditional distribution, as
was done in Boese v. King.
On the contrary, the decree was
the same as if the Bankruptcy Act had not been passed, and the
court held that, without giving any effect to the statute, the
insolvent, by what was done in the chancery court, could compel the
same distribution and obtain for himself the same advantages as
were contemplated by the insolvency law. We are of opinion that the
proceedings in the chancery court cannot be given that effect. The
enforcement of state insolvency systems, whether held to be in
pursuance of statutory provisions or otherwise, would necessarily
conflict with the national purpose to have uniform laws on the
subject of bankruptcies throughout the United States.
As all the proceedings were had under the Arkansas insolvency
law, we need not decide whether, independently of statute, an
assignment for the benefit of creditors on the conditions specified
in the decree would protect the property of the insolvent from
seizure to pay the judgment. And, as the passage of the Bankruptcy
Act superseded the state law at least insofar as it relates to the
distribution of property and releases to be given, plaintiff in
error is entitled to have its judgment paid out of the fund in the
hands of the receiver.
MR. JUSTICE McREYNOLDS, MR. JUSTICE BRANDEIS, and MR. JUSTICE
SANFORD are of opinion that the decree should be affirmed.