16 Blatchf. 439 | U.S. Circuit Court for the District of Northern New York | 1879
On the 23d of August, 1S75, Henry T. Buell made proof in bankruptcy against the two bankrupts, setting forth that they were, before the filing of the petition in bankruptcy, in
The district court held that the creditors of the fiiqp of O. L. Nims & Co. and the creditors oÍ the firm of O. L. Nims. Agent, are entitled to share ratably íd all the joint assets of the bankrupts, and that neither section 5121 of the Revised Statutes, nor the rule of equitable distribution which that section is intended to adopt, precludes the creditors of the bankrupt jointly from resorting to any joint assets of the bankrupts which may exist. [Case No. 10,268.]
The provisions of section 5121 of the Revised Statutes are as follows: “Where two or more persons who are partners in trade are adjudged bankrupt, either on the petition of such partners or of any one of them, or on the petition of any creditor of the partners, a warrant shall issue, in the manner provided by this title, upon which all the joint stock and property of the copartnership, and also all the separate estate of each of the partners, shall be taken, excepting such parts thereof as are hereinbefore excepted. All the creditors of the company and the separate creditors of each partner may prove their respective debts. The assignee shall be chosen by the creditors of the company. He shall keep separate accounts of che joint stock or property of the copartnership and of the separate estate of each member thereof; and, after deducting out of the whole amount received by the assignee the whole of the expenses and disbursements, the net proceeds of the joint stock shall be appropriated to pay the creditors of the copart-nership, and the net proceeds of the separate estate of each partner shall be appropriated to pay his separate creditors. If there is any balance of the separate estate of any partner, after the payment of his separate debts, such balance shall be added to the joint stock, for the payment of the joint creditors; and, if there is any balance of the joint stock, after payment of the joint debts, such balance shall be appropriated to and divided among the separate estates of the several partners according to their respective right and interest therein, and as it would have been if the partnership had been dissolved without any bankruptcy; and the sum so appropriated to the separate estate of each partner shall be applied to the payment of his separate debts. The certificate of discharge shall be granted or refused to each partner as the same would or ought to be if the proceedings had been against him alone. In all other respects the proceedings against partners shall be conducted in like manner
It is suggested, that the language of section 5121 does not in terms prescribe the rule of distribution when debts are proved against the bankrupts jointly, which are not partnership debts, but that that section deals only with the mode of distribution as between partnership creditors and creditors of the partners separately, and, where the rights of those classes of creditors are involved, applies the equitable rule, that the joint property shall be first applied to pay the joint debts, and the separate property to pay the separate debts of the partners respectively; that the creditors of O. L. Nims & Co. are no more creditors of the bankrupts separately than are the creditors of O. L. Nims, Agent; that both classes are joint creditors; and that, as the creditors of O. L. Nims, Agent, can resort to the separate property of the bankrupts as fully as the creditors of O. L. Nims & Co. can, the latter ought to be permitted to resort, equally with the former, to any joint assets. The answer to this suggestion is, that debts against the bankrupts jointly, as members of the firm of O. L. Nims & Co., are debts against each partner separately, and that, if there be debts against them jointly which are not debts against them severally, and are not debts of the copartnership of O. L. Nims, Agent, such latter debts are outside of the provisions of section 5121. This does not authorize the court to treat as debts of the copartnership of O. L. Nims, Agent, debts which are not debts of the copartnership of O. L. Nims, Agent.
In Forsyth v. Woods, 11 Wall. [78 U. S.] 484, the supreme court had under consideration section 36 of the bankruptcy act of March 2, 1867 (14 Stat. 534), the provisions of which are those found in section 5121 of the Revised Statutes. In referring to those provisions, the court, through Mr. Justice Strong, says: “It is not certain that a promise by a partnership and a promise by the individual partners collectively have the same effect. If a firm be composed of two persons associated for the conduct of a particular branch of business, it can hardly be maintained that the joint contract of the two partners, made in their individual names, respecting a matter that has no connection with the firm business, creates a liability of the firm, as such. The partnership is a distinct thing from the partners themselves, and it would seem that debts of the firm are different in character from other joint debts of the partners. If it is not so,
It follows, that the order under review must be reversed and vacated, with costs.
• The same decision is made in the Case of Blackmar.