Pobreslo v. Joseph M. Boyd Co.

Background

A Wisconsin corporation transferred all its property to assignees for the benefit of its creditors. A single creditor who had not agreed to the assignment sued the company, won a money judgment, and then tried to garnish money held by the assignees and a court-appointed trustee. The creditor argued the assignment was void because of procedural defects and that the state law conflicted with the federal Bankruptcy Act.

Reasoning

The Court examined the Wisconsin statute that governs voluntary assignments for creditors. It explained that the parts of the state law dealing with discharging a debtor from debts are superseded by the federal Bankruptcy Act. But the rules that only regulate how an assignment is carried out — such as requiring bonds, inventories, and court oversight — are separate and survive federal law. The Court held that a clause in §128.06 prevents a creditor from getting priority by garnishment over other creditors when a debtor has made an assignment, and that clause is valid and effective to stop the garnishment in this case.

Real world impact

The decision leaves trustees and assignees in control of assigned assets against single-creditor garnishment attempts. It preserves state procedures that aim to ensure equal, proportional payouts to all creditors and confirms those procedures can operate unless the federal Bankruptcy Act expressly displaces them. The ruling therefore protects collective distribution from disruption by individual collection actions.