95 F. 282 | W.D. Wis. | 1899
On May 3, 1899, George J. Friederick and Sever Nelson, partners engaged in the retail grocery trade on State street, in Madison, filed their petition in voluntary bankruptcy, and on May 4th were duly adjudged bankrupts by this court, both as partners and individuals. In their petition they each testify that they have no individual property, real or personal, except such exemptions as they may select under the exemption laws of Wisconsin, and they claim the right to have their exemptions set apart by the trustee from the partnership property turned over to him under the law. On May 17th O. K. Tenney, of Madison, was appointed and qualified as trustee, and thereupon the bankrupts applied to him to set off their exeruptions from the partnership property, which the trustee refused1 to do, and a petition was immediately made to the referee to allow the exemptions, who decided that no exemptions could be allowed from the partnership property. An appeal was taken from the decision of the referee, and the question has been argued, and is now for decision by the court. The exemptions are claimed under subdivision 8 of section 2982 of the Bevised Statutes of Wisconsin, which provides that the following property shall be exempt, to wit: The tools, implements, and stock in trade of any mechanic, miner, merchant, trader, or other person, used and kept for the purpose of carrying on his trade or business, not exceeding two hundred dollars in value. The bankrupt law of 1898 provides as one of the duties of trustees under the law that they shall respectively set apart the bankrupt’s exemptions, and report the items and estimated value thereof to> the court as soon as practicable after their appointment. The referee disallowed the claim of the petitioners on the ground that the property was partnership property, and there had been no severance. But I think this question was met and disposed of by the supreme court of Wisconsin in O’Gorman v. Fink, 57 Wis. 649, 15 N. W. 771, in favor of allowing the exemptions. In this case the entire partnership stock had been levied upon and was in the hands of the marshal under an execution issuéd out of the United States circuit court. There was no severance in fact, and, indeed, there could be none. The
“But it is said that the plaintiff, as an individual member of the Arm, was not entitled to his exemption out of the firm property so long as it retained its diameter as firm property. In other words, it is claimed that the exemption statute relates to and is intended to deal with property which is owned in severalty, or with property which in its nature is severable, where the right of severance exists, and that the exemption does not and cannot attach to the property of a firm, which does not belong to either partner as his own before an actual division by the partners. On this subject Mr. Freeman, in his work on Executions, uses this just language: Tt often happens that property designated as exempt by statute belongs to two or more persons, either as co-tenants or co-partners. The question then arises whether this property must be treated as exempt to the same extent as if held in severalty. The answers to this question are irreconcilable, and the opposing opinions are both supported by very respectable authorities.’ Section 221,.”
The court then proceeds to say:
“The question whether one partner, with the consent of the other partners, can claim an exemption out of the firm property in a case like the one before ns, has never been passed upon by this court. Therefore, in view of the conflict of judicial opinion on the subject, we feel quite free to adopt that rule which seems most in harmony with our decisions under the exemption laws, and the humane spirit of these statutes. It is quite unnecessary to observe that this court has deemed it a duty to construe liberally these laws, in order to carry out the manifest purpose of their enactment. * ~ * In the Russell Case (Russell v. Lennon, 39 Wis. 570) the plaintiffs were partners doing business as tinners and jobbers. The levy was upon their tools and stock in trade for a partnership debt. The learned chief justice, in the opinion, says: ‘Wo have no doubt that in proper cases each member of a partnership is entitled to his separate exemption out of the partnership property, and that the partnership property, after levy, may he severed by the partners, so that each partner may have his several exemption. But it seems to us to be as indefensible to extend the personal privilege of exemption to a partnership, as such, as to extend it to a corporation aggregate.’ It will be seen tha1 there is hern a clear and distinct intimation that each member of a partnership is entitled to his separate exemption out of the partnership property, and the chief justice sa.ys that after the levy the partnership properly may be severed by the partners so as to give each partner his several exemption. In that case the court was not called upon to state what acts were necessary to be done by the partners after a levy to make a severance of the partnership property, nor do we well see what more the partners could do to accomplish this end than consent that each should have his exemption, and exercise his power of selection. This, in contemplation of law, ought to amount to a severance, so that the several right of each partner would attach to the portion by him selected. Unless the severance can be made in this way, ii is very evident that the right of each partner to his separate exemption out of the partnership property after levy cannot be protected or enforced; for certainly ilia partners cannot, after a levy, take possession of the corpus of the partnership property, and make a division of it among themselves. This, obviously, is impracticable. ‘Therefore, unless the mutual consent of the partners that each shall have his exemption and make his selection from the partnership property has the effect to partition or sever the joint property so that the several exemption will attach to the por*284 tion selected, no exemption in many cases could be bad. But where all the partners demand the exemption, each must be deemed to consent that the others have it, and make his individual selection. This, we think, was all the court in the Russell Case deemed' necessary 'for the partners to do in order to make a severance of the partnership property, and so change its character that the statutory right would attach as in goods held in severalty. We are well aware there are most respectable adjudications against this view.”
This case was decided by the unanimous opinion of the five judges then constituting the court. It is just and sound in its conclusions, and has never been overruled or qualified by any subsequent adjudication. In my judgment, it meets every condition and requirement Of the case at bar for the allowance of these claims. In most of the cases since decided in which the claims of partners have been disallowed it has been either where there was an element of laches, or where the question arose between third parties, neither of whom were claiming the exemptions. Of course, where partnership property is levied upon under an execution against the partnership, the claims to exemption should be made without delay, or they will be waived. That rule is just, and necessary, in order that the creditor, in case the claim is allowed, may proceed to secure his debt by a further levy or in some other manner. If the debtor is guilty of any laches in making the claim, it will be held to constitute a waiver of his right, although it is held that he cannot, by express agreement in advance, waive his exemption. There is no conclusive' presumption, where partnership property is levied upon, that the individual partners may not have individual property more than enough to satisfy all their claims under the exemption laws of the state. But, while this is so, it must be remembered that where persons are engaged in trade as partners it is not at all probable that they will also have stock in trade on their individual account, because this would be inconsistent with the partnership obligations. So that in general, if exemptions cannot be allowed to the individual partners out of partnership property, they cannot be allowed at all, because there will be no property to which the exemptions could apply. But where it affirmatively appears, as in this case, that they have no other property, and they are guilty of no laches, .and there is no question of intervening rights, there would seem to be no good reason, all the partners consenting, as in this case, and joining in the petition, why they should be denied the benefit of the law, which was intended to apply equally to all. No reason but a purely technical one has ever been suggested why men engaged in business as partners, and having all their means employed in that way, should not be entitled to the benefit of our exemption laws, as well as persons employed in trade on their individual account. There is no reason why a man’s family should be turned into the streets without a dollar to help themselves with, or to keep off starvation, by the greed and rapacity of creditors, .in the one case more than in the other. Our exemption laws are liberal. They were so framed and inténded by the wise framers of our constitution and by our legislature, and they have received a liberal and sensible construction by the courts to accomplish the beneficent purpose of the fram-
If these exemptions are to be allowed to the individual partners out of partnership property in cases where they have no individual property, what possible difference does.it make to the creditors whether the exemptions are selected and taken out before the property is turned over to the trustee or immediately after? It is quite evident that it is not contemplated by the bankrupt law that they should be taken out before, because it provides for the trustees setting- apart and fixing a value upon the exemptions. The fixing- a value of course could not be left to the debtor. He might fix a value that would take the entire stock. That must be done under the auspices and direction .of the trustee, and to that end he should have possession of the entire estate. I am unable to see why the course pursued in this case by the debtors was not the proper one under the law. They filed their petition, and turned over all the property, claiming their exemptions at the same time. I think it was the duty of the trustee to have set apart the exemptions, and cause a proper valuation of them to be made.
In some of the cases decided since that of O’Gorman v. Fink the question has arisen between creditors upon the validity of an as; signment under the state insolvent law. This was the case in Bank v. Hackett, 61 Wis. 335, 21 N. W. 280. There was an effort made to set aside the assignment because the partners had reserved partnership property to themselves as exempt. In sustaining the assignment the court said:
“A partnership is not entitled to an exemption out of the co-partnership property. The reservation in the case at bar, being of the property owned by the partners jointly to them jointly, is nugatory and void.”
In Bong v. Parmentier, 87 Wis. 129, 58 N. W. 243, partners had assigned for the benefit of creditors all their property “except such ás is exempt from levy and sale under execution.” The whole of their stock of goods was included in the inventory, and delivered to the assignee, and no selection or claim of any specific property as exempt was made until more than 10 weeks after the assignment ivas completed. Nor did it appear that the partners did not possess individual property sufficient to satisfy the right to exemptions. Mr. Justice Oassoday, in delivering the opinion of the court, says:
“The partners did not, at any time before the assignment, and while'they were owners of the property, sever (heir interest therein. For more than ten weeks after (he making of the assignment neither partner made any specific selection or claim for any such exemption. This was certainly an unreasonable delay, and a waiver of any right to such exemption. Besides, for aught that appears in the record, the respective partners may have individual property sufficient to satisfy any and all claims for exemptions.”
In Lamont v. Wootton, 88 Wis. 107, 59 N. W. 456, partners assigned for the benefit of creditors all their property except such as might by law be exempt from seizure on execution or attachment. All of the property was delivered to the assignee, and was included in the inventory without mention of exemptions, and no claims for exemptions were made until nearly a month later, after the as-signee had expended labor and money upon the prop'erty in caring for and insuring it and getting it ready for sale. It was very properly held that there was a waiver of the right to exemptions from the partnership property. Mr. Justice Newman, in delivering the opinion, says “that the co-partnership had no right to exemptions,” which is undoubtedly true. He also says, “The copartners had no such right in the co-partnership property until after a severance,” which is also true. But he does not stop to define what will amount to a severance. It was not necessary, as that had been already settled in O’Gorman v. Fink. The court nowhere intimate any dissatisfaction with the decision in that case, or any intention to qualify it in any way, and I take it that the refusal to allow the exemption is placed upon the other very satisfactory ground that no claim for exemptions was made for nearly a month after the entire property had been in the possession of the assignee, and he had expended labor and money upon it in caring for it, insuring it, and getting it ready for sale. Tbe court say that the case is governed by the decision in Bong v. Parmentier, and clearly in that case the denial to exemptions was placed upon the ground of laches. It does not appear that the court in either case intended to resort to the old technicality that there had been no severance,