Suspension of State Insolvency Laws by Operation of the Federal Bankruptcy Act

The Supreme Court of Washington in the recent decision of Armour & Co. v. Becker et al., has again raised a question mooted since 1819, as to the effect of the existence of a Federal Bankruptcy Act on the operation of a State Insolvency Law. Under present conditions, the problem of the availability of liquidating devices becomes peculiarly important, and warrants an analysis of the existing law on the subject. In the instant case, the plaintiff sought to recover the sum of $293.14 for goods and merchandise delivered to defendant, who was running a meat market and purchased goods until December 18, 1929, when he became insolvent. Defendant then made an assignment for the benefit of his creditors to one Beeson, which assignment was made, under stipulated facts, strictly in accord with the insolvency statute of Washington. Plaintiff received a check as his pro rata share under this assignment, but did not negotiate it, and then brought this action for the original sum due, against both the defendant market owner and his guarantor, on the ground that the Federal Bankruptcy Act had rendered the assignment void or voidable, and that any creditor not having received payment in full would be entitled to ignore the assignment and proceed to collect his claim against the debtor and guarantor. The Supreme Court in affirming a judgment for the plaintiff, relied on the two cases of International Shoe Co. v. Pinkus, and Re Tarnowski