Case Title: Carlson's for Music, Inc. v. Gould

Citation: 489 P.2d 1038

Docket Number: 

State: colorado

Court: Colorado Supreme Court

Date: 1971-10-12T00:00:00Z

Document:
489 P.2d 1038 (1971) In the Matter of the Assignment of CARLSON'S FOR MUSIC, INC., a Colorado Corporation, Insolvent, Union Trust Company, Assignee, Plaintiff in Error, v. Joseph B. GOULD, Individually, and doing business as Enterprise Building, Defendant in Error. No. 23706. Supreme Court of Colorado, En Banc. October 12, 1971. Rehearing Denied November 8, 1971. A. E. Radinsky, Denver, for plaintiff in error. Creamer & Creamer, George Louis Creamer, Denver, for defendant in error. DAY, Justice. This appeal is brought to review the judgment of the Denver District Court dismissing a contempt citation against defendant Gould. The chief point of error, however, is directed to the trial court's ruling that the Colorado "Assignment-Benefit of Creditors" statute (C.R.S.1963, 11-1-1 et seq.) is unconstitutional. We reverse. The chronology of this action in the district court is as follows: On August 29, 1966 assignor Carlson's for Music, Inc., made a voluntary assignment of its assets and the Union Trust Company was appointed as assignee. Inventory of the assets and a bond in the amount of $6,566 were filed in the Denver district court on September 6, 1966 in civil action No. B-95417, In The Matter of the Assignment of Carlson's For Music, Inc., a Colorado Corporation. According to an affidavit filed with the court on September 20, 1966, notice to creditors dated September 7, 1966 was deposited in the United States mail on September 9, 1966. Among the creditors notified was Enterprise Building, c/o Joseph P. Gould. On October 24, 1966, a motion for citation directed to Gould to show cause why he should not be adjudged in contempt of court was filed with the court. Grounds for the motion were the allegations that Gould had seized and retained a portion of *1039 the assets of Carlson's for Music subsequent to the assignment and in violation of pertinent portions of the statute. A citation for contempt was issued, and upon Gould's motion to quash, the district court without a hearing on the merits ruled the statute involved to be unconstitutional. The district court apparently based its conclusion of unconstitutionality upon the holding of International Shoe Company v. Pinkus, 278 U.S. 261, 49 S. Ct. 108, 73 L. Ed. 318 (1929). Pinkus involved a ruling by the United States Supreme Court that the Arkansas law governing the distribution of property of insolvents was invalid because it operated within that field pre-empted by the Federal Bankruptcy Law. The holding in that case has been distinguished by more recent decisions of the United States Supreme Court holding that, while state insolvency laws are invalid, states may, in fact, enact statutes providing for the voluntary assignment of debts for the benefit of creditors. For example, in the case of Johnson v. Star, 287 U.S. 527, 53 S. Ct. 265, 77 L. Ed. 473 (1933), the Court addressed the question of whether the Texas assignment for the benefit of creditors statute was repugnant to federal laws: The rationale behind upholding the right of the various states to enact so-called "assignment for the benefit of creditors" statutes has perhaps been best stated as follows: However, the scope of such statutes has been limited. The following language would appear to hold that "assignment for benefit of creditors" statutes are not repugnant to federal law, but sections providing for the mandatory discharge of the assignor are: Therefore we must conclude that the provisions in the Colorado statute providing for discharge of the assignor (Sections 11-1-27 and 11-1-34 to 50 inclusive) have been suspended by the Federal Bankruptcy Act. See Johnson v. Star; Pobreslo v. Joseph M. Boyd Co., both supra. This does not mean, however, that the remaining portions of our statute are also invalid. The sections are severable without doing violence to the state's sovereign right to provide laws for distressed debtors. The Colorado statutory scheme provides perfectly acceptable provisions by which debtors may voluntarily assign their assets for the benefit of their creditors. By a long series of decisions, extending from Salsbury v. Ellison, 7 Colo. 167, 2 P. 906 (1883), to International Brown Drilling Corp., v. Ferguson Trucking Co., 141 Colo. 250, 347 P.2d 773 (1959), this court has recognized assignments for the benefit of creditors, both under statutory and common law, to be a valuable and necessary adjunct to the credit laws of this state. Thus, while compliance with the statutory provisions will not allow the debtor to be discharged from his debtsfor this the Federal Bankruptcy laws must be used still, such voluntary assignments are available. In reaching a similar result, the Texas Court of Civil Appeals, in an opinion cited with approval by the Supreme Court, in Johnson v. Star, supra, spoke as follows: * * * * * * In agreement with the logic of the Texas Court of Appeals, we conclude that the Denver District Court was in error when it held that the entire statute of "AssignmentBenefit of Creditors" was unconstitutional by reason of the Federal preemption of the Bankruptcy Law, when in fact only those sections relating to the discharge of assignors or debtors are repugnant to the Federal Law and preempted by it. The question then arises whether, on remand, Gould can be held for contempt given the validity of the statute. Gould alleges that inasmuch as he has never been made a party to any action, nor entered a general appearance, therefore the district court has no jurisdiction over him such that he may be cited for contempt. The Citation for Contempt previously issued and then quashed by the lower court stated that Gould had been ordered by the court to do certain things, and was being cited for failure to comply with such order. Although it does not appear from the face of *1041 the citation, we assume that Gould was being cited for failure to return to the assignee that property which had been seized from Carlson's for Music after notice of the assignment. We note that under the provisions of the "AssignmentBenefit of Creditors" statute, all property after assignment is under the jurisdiction of the court: We conclude that only upon hearing on the citation can it be determined whether the articles of property seized by Gould were in fact included among those validly assigned by Carlson's for Music, Inc., and were seized without right after the property came under the jurisdiction of the court. If such be established, then a Citation for Contempt against Gould for failure to comply with lawful order of the court concerning such property would be the remedy as provided in section 11-1-7. It has been established in Colorado that "one who interferes with property in the custody of the law without permission of the court in whose custody it is, is guilty of contempt." Clear Creek Power & Development Co. v. Cutler, 79 Colo. 355, 245 P. 939 (1926). This also assumesa matter we do not decidethat the statutory procedures and rules of civil procedure have been followed in all particulars as will give the court its original jurisdiction. The ruling of the district court is reversed and the cause remanded with directions to enter an order in said proceedings *1042 suspending the operation of sections 11-1-27 and 11-1-34 to 50 inclusive, and to reinstate the citation for contempt with further proceedings to follow consonant with the views enunciated herein. PRINGLE, C. J., not participating.