18 F.2d 311 | E.D. Pa. | 1926
The fact situation here, while perhaps not uncommon, has a rather odd feature. William C. Harmon, Jr., filed a voluntary petition in bankruptcy, averring that he and John L. MeCloskey (on whose behalf the present motion is made) were partners, doing business under the firm name of MeCloskey & Harmon, and praying in effect that both the firm and the petitioning partner individually be adjudged bankrupts in accordance with the Bankruptcy Law (Comp. St. § 9585 et seq.), and General Order YIII. It is evident that the petition proceeds upon the theory of an existing partnership, and the theory of the motion is that McCloskey is not a partner. The general order contemplates a proceeding against one who is admittedly a partner, but who denies the partnership to be the proper subject of bankruptcy proceedings, and because of this the order grants to him the right and opportunity to defend the firm, and secure, if he can, an adjudication that the firm is not bankrupt. The general thought of this feature of Order YIII is that the noneonsenting partner is accorded precisely the same right to defend against a voluntary petition not signed by him which he would have if the petition had been a petition in involuntary bankruptcy. There is, however, the added right to make any defense “which any debtor proceeded against is entitled to take by the provisions of” the Bankruptcy Act. This makes room for the entrance of the thought that one of the defenses which an alleged bankrupt might set ■ up to a bankruptcy proceeding is that he is not a “debtor,” but, on the other hand, this would seem to be granting him a right outside and beyond the rights conferred by the order, because the rights given are restricted to those which “a debtor” would have.
The bankruptcy laws are so imperfectly and so inadequately digested in any available index that one can never be sure by a perusal of the table of contents or index that we have been put on the track of all the provisions pertaining to any special subject of inquiry, but, so far as we have been advised, the pertinent provisions are those found in section 5 (Comp. St. § 9589). These provisions are to the effect that a partnership, until final settlement of the partnership business, may be adjudicated a bankrupt, that the partnership effects shall be administered as in other eases, and that the court of bankruptcy, which has jurisdiction of one of the partners, shall assume jurisdiction of all and the administration of both “the partnership and individual property.” It is further provided that, in the event of some “but not all the members of a partnership being adjudged bankrupt, the partnership property shall not be administered in bankruptcy, unless by consent of the partner or partners not adjudged bankrupt; but such partner or partners not adjudged bankrupt shall settle the partnership business as expeditiously as its nature will permit, and account for the interest of the partner or partners adjudged bankrupt.” It is thus clear that this legislation contemplates the existence of a partnership in admitted fact, and not the case where there is a denial by one of the alleged partners that he is a partner. The last quotation from the law is likewise evidently based upon the thought that a partnership cannot be insolvent as long as any one of the partners is solvent, but that the individual partners may be insolvent and the partnership itself solvent. It thus further appears that none of these provisions of the law nor the terms of the order directly meet the fact situation here presented.
The defense of MeCloskey, in substance, is that Harmon is seeking to drag him into bankruptcy through the subterfuge of asserting that he is a member of the firm of Mc-Closkey & Harmon, when in actual fact he is not such member. MeCloskey proceeded at first upon the theory that denial of partner-' ship was a defense, by filing an answer averring that he was not a partner, and upon this question of fact he demanded a trial by jury. After this the decision in the case of Meek v. Shugert was handed down. In accordance with what he believes to be the doctrine of that case, MeCloskey now contends that the court is without jurisdiction to adjudge either him or the firm to'be bankrupt, and on this ground has moved to have the petition dismissed.
The position of the opposers of the present motion is that the cited case has no application. This takes us to that ease. It arose in the Middle District of Pennsylvania. We have been given no reference to the opinion of the trial court, but have been referred to the review of the judgment reached and the
As we understand the doctrine of this ease, it is based upon the thought that partnerships being defined to be persons within the meaning of the Bankruptcy Act, the provisions of the act respecting the persons who might be adjudged bankrupts and the manner in which they could _be so adjudged applied, and that as against partnerships as other persons bankruptcy proceedings must be one of two kinds. One is'based upon a voluntary petition, and the .other upon the petition of creditors. This thought was followed to its conclusion “that there is no authority under the act to adjudge a partnership bankrupt except upon its own voluntary petition or upon an involuntary petition filed against it by creditors, and none to make such an adjudication upon a petition filed against it by one of its members.” It seems to us this is conclusive of the argument.
We are unable to get into accord with the counsel supporting the proceedings in the instant case that it may be distinguished from the above-cited case on the ground that, in the cited case, Shugert, who signed the petition, either signed it merely as an individual and did not attach the firm’s signature nor assumed to be acting for the firm, and that the only reference in the petition to an adjudication against the firm was the incidental and casual reference to the desire of the firm to be adjudged a bankrupt. We assume counsel, in making this statement, made it after an examination of the original petition, and we do not question the accuracy of the statement made. We do not see, however, that this fact, even if it be one, affects the authoritative ruling to which we have referred, because it is clear that both the Circuit Court of Appeals and the Supreme Court disposed of the ease, understanding or assuming that the petition of Shugert was both by him and in the name of the firm acting by and through him. As we read the opinions accompanying the rulings of the Circuit Court of Appeals and the Supreme Court, the latter, with a clarity which leaves room for no doubt, lays down the flat doctrine that no person can be adjudged a bankrupt except either upon his own petition or that of the required number of creditors as provided in the Bankruptcy Act.
An appropriate order dismissing the petition in bankruptcy as against MeCloskey and the partnership may be submitted.