Statutory provision in Texas governing assignments for the
benefit of creditors
held consistent with the Bankruptcy
Act, upon the authority of
Pobreslo v. Joseph M. Boyd Co.,
ante, p.
287 U. S. 518. P.
287 U. S.
528.
47 S.W.2d 608 affirmed.
Appeal from a judgment of the Supreme Court of Texas which
denied a writ of error to the Court of Civil Appeals, 44 S.W.2d
429, but approved the opinion of that court holding a garnishment
invalid under the state law governing assignments for the benefit
of creditors.
MR. JUSTICE BUTLER delivered the opinion of the Court.
Prior to March 13, 1931, appellants obtained a judgment for
$113.20 against the Dallas Showcase & Manufacturing Company. On
that day, the latter, being insolvent and having unsecured
indebtedness of about $11,000, made to appellee a voluntary
assignment of all its property for the benefit of its creditors.
Appellants refused to accept under the assignment, and brought
garnishment proceedings in justice court against the appellee. He
answered that as such assignee, acting under Title 12 of the Texas
Revised Civil Statutes 1925, he had converted the assigned property
into cash, and had $582.63, which, as he insisted, was not subject
to garnishment. The justice of the peace held him liable. He
appealed to the county court, and there the case was submitted on
an agreed statement showing the facts aforesaid. The court held the
state law in conflict with the Bankruptcy
Page 287 U. S. 528
Act, and that therefore the amount on hand was subject to
garnishment. The Court of Civil Appeals reversed, 44 S.W.2d 429,
and the supreme court, approving its opinion, denied writ of error.
47 S.W.2d 608.
The sole question is whether, as construed by its highest court,
articles 261-274 of Title 12 are repugnant to the Bankruptcy
Act.
These provisions are derived from an Act of March 24, 1879,
(Acts 1879, p. 57) as amended, Acts 1883, p. 46. Evidently, that
statute was intended to take the place of the Bankruptcy Act of
1867, which was repealed in 1878.
Cunningham v. Norton,
125 U. S. 77,
125 U. S. 81. It
established a complete system for the administration of property
conveyed by insolvent debtors for the benefit of their creditors.
Tracy v. Tuffly, 134 U. S. 206,
134 U. S. 223.
Every such assignment is required to provide for ratable
distribution of the insolvent's estate among the consenting
creditors, and, whether or not so specified, is deemed sufficient
to pass all the assignor's property to the assignee. Art. 261.
"A debtor may make such assignment and shall thereupon stand
discharged from all further liability to such consenting creditors.
. . . Such debtor shall not be discharged from liability to such
creditor who does not receive as much as one-third of the amount .
. . allowed in his favor. . . ."
Art. 263. Nonassenting creditors take nothing under the
assignment, Art. 265, but may garnishee any excess remaining after
full payment of consenting creditors and the expenses of executing
the assignment. Art. 271.
"The statute in question is in no sense an insolvent law,
providing for the discharge of a debtor by a compliance with its
terms without the consent of the creditor, but is a statute which,
for the better protection of creditors, prescribes a mode for the
administration of the estates of insolvents under assignments made
by the debtors themselves, which would be good at common law,
Page 287 U. S. 529
unaided by the statute, and, like any other trust, could be
enforced in a court of equity in the absence of a statute providing
a mode of administration."
Keating v. Vaughn, 61 Tex. 518, 524.
And see Leon
& H. Blum v. Welborne, 58 Tex. 157, 161.
McKee v.
Coffin, 66 Tex. 304, 309, 1 S.W. 276.
Fant v.
Elsbury, 68 Tex. 1, 5, 2 S.W. 866. And, in a case arising
after the passage of the present Bankruptcy Act, a lower court
propounded the question whether this law was suspended by the
Bankruptcy Act. The supreme court, after reference to
Boese v.
King, 108 U. S. 379,
said:
"The effect of the ruling [in that case] is that, insofar, at
least, as an insolvent law of a state provides for a release by the
creditors, it is suspended by a bankrupt law of the United States,
but that, if the assignment convey all the debtor's property,
subject to the payment of his debts, for the equal benefit of all
his creditors who may accept under it, it is otherwise valid,
except as against proceedings seasonably taken under the Bankrupt
Act."
Patty-Joiner & Eubank Co. v. Cummins, 93 Tex. 598,
604, 57 S.W. 566, 568. And, in a later case, the court held that,
though the statute, insofar as it makes provision for exacting
releases should be held to be an insolvent law, and therefore
suspended by the Bankruptcy Act, one who had accepted and received
one-third of the amount of his claim under an assignment good at
common law, though exacting such release, where no proceedings were
had under the Bankruptcy Act, thereby discharged the debtor from
liability.
Haijek & Simecek v. Luck, 96 Tex. 517, 74
S.W. 305.
In the case at bar, the Court of Civil Appeals for the Fifth
District observed the differences between state insolvency laws and
those merely regulating voluntary assignments for the benefit of
creditors, and, following the rule established by the Texas Supreme
Court that nonconsenting creditors may not seize property covered
by such assignments,
Page 287 U. S. 530
held that the fund in the hands of the assignee was not
garnishable. And the supreme court, approving that decision and
disapproving one to the contrary announced by the court of civil
appeals for the sixth district,
Johnson v. Chapman Milling
Co., 37 S.W.2d 776, held that the questions at issue have been
definitely settled by this Court in the cases of
Patty-Joiner
& Eubank Co. v. Cummins, supra, and
Haijek &
Simecek v. Luck, supra.
Accepting, as we do, that court's construction of the provisions
in question, we are of opinion that they are not repugnant to the
Bankruptcy Act. This case is ruled by our decision in
Pobreslo
v. Joseph M. Boyd Co., supra, p.
287 U. S. 518.
Judgment affirmed.