InreSlULS, :Bankrupt.; ,
(District C'Qurt, W. D., J;'enncssee. 'July 21, 1880.)
'c.l' . . . ' ,
Non-assenting crcditors,who have proved debts, may question the validity of' any assent given 'in favor of tile'discharge, and object to' granting a by showing that the proper number ana amount of creditors have, not asSen,t;cd.
2. SAME SUBJECT-PAR'l'NERSjIIP-SunVIVING
DEBT-CREDITORS AS FUNCTIONARIES.
A surviving partner may assent to the bankrupt's discharge in the name of the firm, and it is not' necessarythiit the bankrupt should procure theassel).t of the admin'istrator of the deceased partner or the creditors of t4e firm. His power to do this may be derived froID general, principles govern}ng his relation to those interested in the debt proved by him, or the firm, and also as an implied grant of power from the bankruptcy 'statute fueditors are, nnder the bank'. rupt law, in some sense, functioqarj,es perlol'ming guasi-ministerial or quasi-judicial duties.
In nankruptcy. L. B. McFarland, for bankrupt. Flumes et PO'8ton, for creditors. HAMMOND, D. J. One of the creditors'assenting to the bankrupt's discharge is J. H. McClellan, as surviving partner of the firm of Guy McClellan & partner being dead. Ilthis debt be counted the bankl'uptis!entitled to his discharge because of having secured the assent of a sufficient number and amount of his creditors who have proved their debts. But if this debt, which was als6 proved by the suris a deficiency viving partner, be rejected in the count, of assenting creditors, and the must be refused. The objection is made by a non.assentin'g creditor that a surviVing partner cannot assent BO as to bind either the istrator of the deceased creditor or the creditorS of the firm, for whom it is argued he is a trustee; and therefore the assent of these cestuis que trust must have prdcured to entitle th'e bankrupt to his certificate. ' question has been argued on both sides with exceptional thoroughness, and it is said by counsel that no case
ruling the point has been found. The bankrupt's counsel submits that the non-assenting creditor cannot question the action of the surviving partner, who is responsible alone to the administrator of the copartner, or to the firm's creditors, if he violates his trust. But I am of opinion that non-assenting creditors have a clear right to insist that the certificate of discharge shall not be signed, unless it is shown by the record that the bankrupt is entitled to it. They may object to invalid or insufficient assents, for the reason that their own debts are affected and may be discharged if they be permitted to operate contrary to law. The learned counsel for the objectors insists that by the death of a partner the scope of the partnership is restricted winding up the concern, and the powers of the survivor are correspondingly so restricted that he can appropriate nothing to himself, nor do anything which will operate to the injury either of the creditors of the firm or the administrator of the deceased partner's estate; that he cannot, without consideration, release a debt due the firm, or give away any portion of the partnership effects, and that his duties are confined to realizing all that is possible out of the assets for the payment of .the creditors of the firm and distribution to the df;lceased partner's representatives. The application of this argument to the case inha.nd is that it is the survivor's duty to keep the debt against this bankrupt alive to be collected out of future acquisitions, and that, by assenting to his discharge"he thereby extinguishes the debt in violation of this duty, and entails a loss upon those interested, wpich he has no power to do without their consent. No caseis cited which discusses the power of a surviving partner in this matter of consenting to a bankrupt's and the argumeI}t is deduced from principles applied in common-law or equity in restraint of a surviving partner's power over the partnership property and in aid of those interested in its most beneficial appropriation to the purposes for which he holds it. Daniel,v. Daniel, 9 B. Mon. 195; Bookout v. Anderson, 2 La. An. 246; Rogers v. Batchelor, 12 Pet. 221; Vance v. Campbell, 8. Humph. 524; Martin v. Kirk,
· Dr BE SAULS.
2 Humph. 529; Belote Snodgrass, 1 Cold. 441.
7 Yerg. 541; Bancroft v.
These and other cases cited; some of them treating of the powers of a partner in existing firms, and some of his powers after dissolution, all show that a part]J.er cannot waste the assets or act beyond the scope of the partnership business, nor, after aissolution, create new debts, or misapply the firm property. But they seem to me not to settle any principle which militates against the idea, that, after all, it may be within the legitimate scope of a surviving partner's power to assent to a bankrupt's discharge. The nearest analogy to it in the ordinary conduct of his affairs is the release of a debt. The case of Bookout v. Anderson, supra, does decide that in Louisiana a surviving partner cannot release a debtor of the firm so as to qualify him to be a witness, but then the law of Louisiana seems to be peculiar as to the powers of a surviving partner, whO has no right at all to administer the firm assets until authorized by a court of probate. CoIl. Partnership, (4th Ed.) § 129, note 3; ld. § 666. And in Buckley v. Dayton, 14 John. 387, it was held that the release of a witness by one partner alone was sufficient to qualify him. On general principles, a surViving partner is the owner of the partnership assets; he has the legal title, and it is only in a cOurt of equity that he is treated as a trustee. Cas(j v. Abeel, 1 Paige, Ch. 393. He may collect, compromise, or otherwise anange all the debts of the firm, and: his receipts, payments, and doings generally in that behalf .are valid, if honest and within the fair scope and purposes of the trust. And if there be negligence, delay, misconduct, or gross mistake, equity will interfere and give proper relief. Pars. Part. (3d Ed.) 440; ld. 442 and notes. So completely is this so that the firm assets pass to his administrator and to his individual assignee in bankruptcy. Brooks v. Brooks, 12 Heisk. 12; Re Stevens, 5 N. B. R. 112. The power of a partner in an existing firm to release a debt cannot be doubted, even after dissolution. ColI. Part. §§ 468, 636, 637; Story, Part. §§ 115, 252; Pars. Part. 172, note Wj Salmon v. Da.vis, 4 Binney, 375; Nepier v. McLeod, 9 Wend.
1,20;. Robbins 'V. Fullet, 2:4 ,N., 578. And this is particularly so after institution of legal proceedings, when the pow13r rathei'.trom,general practice in actions at law than from privileges of partnership; for.it is generally true that one plaintiff may an .action brought by two. Coll. Part. §§ 441, 636. No case that I have seen suggests that a surviving partner is deprived of this power to release a daht either before or after action brought. In Robbins v. ler, supra, the court say: "The partners may, notwithstanding thedisolntion, still perform any'act relating to debts and con· tracts existing before dissolution which they'might have performed as partners before the dissolntioh, such as releasing or giving a receipt for partnership debt, signing a bankrupt's certificate, etc. The signing of a bankrupt's certificate is the highest exertion of authority referred to,for it releases the debtor and discharges his future acquisitions, but the power do it is welL.established3' Page 573. And see Arton v. Booth, 4 J. B. Moore, 192; S. C. 16 E. C. L. 373, which is a .strong illustration of the power to release after dissolution. Partners are more. notably bound by the acts of each other in proceedings under the bankrupt laws. One may, on behalf of all, prove a debt, vote in the choice of assignees, and sign the certificate. Call. Part. §§ 444, 467;3 Kent, 49; Pars. Part. 172, note w, at page 175; Eden; Banky. 397, in 25 Law Library, 802 iEx parte Hodgkinson, 19 Ves. 291; Ex parte Mitchell, '14 Ves. 521; Ex parte llall, 17 Ves. 62; and other cases 'cited in Mr. Sumner's notes to these cases in Vesey. In this last case, Ex parte fIall, it was the signature of the cel'tificate by one partner after a dissolution. Ina11 the cases cjted, tIond many others examined, while I find no case ruling tue point as to It surviving partner,' I find none taking a distinction against him in this matter of assenting to a discharge; and, inasmuch as his title is enlarged, and he is more exclusively and entirely master of, the assets than pefore dissollJ,tion, or after dissolution, otherwise than by death, it WQuid seem that he would have, as surviving partner,in th:srespect, the same power as that given him in the
IN RE SAULS.
o8.ses· mentioned. In re' Sriusmerez, 1 Atk. 85, it: was. ruled can sign the certificate, and in. a case citediu Bacon's Abridgment, tit. "Bankrupt, K," (1st Ed.) &nd'uote (Ed. 1860) from Green. 260, where the debt proved devolved on the bankrupt himself, it washtlld he mightoonsent to his own discharge as a creditor, "because otherwise he never could be released, as no one else is or could be qualified to' sign the certificate for him." Hilliard, Banky. (2d Ed.) 316, note a. In the case of Barrett, 2. N. B. R. 533, where it was ruled that one partner may execute a powetof attorney to vote for an assignee, and bind his copartners, the exception in favo,]: of such a power is supported as a necessity in bankruptcy cases, upon the authority of some of the English cases I have cited here. Our own bankrupt law, in the matter of the discharge and this assent of creditors, is modelled.on the English statutes Under which these'decisions were. made, and they are quite sufficient as authority. The. learned counsel for creditors here insists that the administrator of the deceased partner can, no more than the surviving partner, assent to' the discharge, and for the same reasons which he so ably presents. The result would be that the: bankrupt cannot have any assent on this firm's de.bt, although it may be proved and counts against him; and we c-animagine .a case where, all or a large proportion of the creditors oitha bankrupt being surviving partners, he could get no discharge at all. It cannot be that he would have to go. to all the creditors of Guy McClellan & Co., and all. the parties interested in the deceased partner's estate as qu,e trust, and pr<>ourei their assent. Ex parte Dubois, 1 Cox, ,Ex parte Rigby. 19 Ves. 463. These cases do not apply toexecutol's Q1'part. nelS. This demonstrates the neceflsity6f making this.power reside in the surviying. partner in bankruptcy cases, whatever his be to release a debt· . am of opinion that the power may be supported as a statutory power under the bankrupt act It is. true, this assent operates to the intere-at of: .the administrator of the deceased partner in this debt against the
bankrupt, but so it does to extinguish the debts of all the non-assenting creditors. These assenting creditors, when sufficient in number and amount, by their assent extirpate all the non-assenting debts. Where do they get the power to do this? Clearly, from the statute. The truth is, they are functionaries-quasi ministerial, quasi judicial, it may becharged in part with the administration of the law, and, as such, the depositaries of certain powers, among which is that of determining when the bankrupt shall be discharged and when not. Hilliard on Bankruptcy, (2d Ed.) 239,241. The law discharges the debts, the law performs the operation of releasing them, the creditors being merely donees of a power to determine the cases in which the law shall so operate. The legislature has left it to the discretion of the creditors whether they will or not assent to the discharge; and this discretion is absolute. Lord Eldon observes that the law has left the bankrupt entirely to the caprice of his creditors to sign the certificate or not, under a high moral obligation, perhaps, but no legal obligation to do it, however great his atonement. And he says "there can be no stronger proof of the good nature and humanity of the British character than the readiness with which creditors sign." Ex parte Joseph, 18 Ves. 340; Ex parte King, 1] Ves. 417; Ex parte Gardner, 1 Ves. & B. 45; Ex parte Cridland, 3 Ves. & B. 95, 103; Hilliard on Bankruptcy, (2d Ed.) 315, 316. The statute does not name a surviving partner as one of the donees of this power, but from necessity, and by all the analogies of the law, it is faily inferable that it was intended he should be the donee, rather than innumerable and remote beneficiaries of the quasi trust he executes. The release is not without consideration, for the bankrupt law enlarges the remedies of the creditors, and gives them inquisitorial and other powers they would not otherwise enjoy. It also gives ample protection against fraudulent bankruptcies· by withholding a discharge in all cases of misconduct by those who ask its relief. Let the bankrupt be discharged.
IN BE READ.
(District Court, W. D. Tennessee. --,1880.)
1. DISCHARGE-EFFECT OF PROVING A DEBT AFTER THE DAY TO SHOW CAUSE.
A debt proved after the day appointed to show cause against a discharge will not be reckoned in determining whether the assets be equal to 30 per centum of the claims proved against the estate, nor whether the requisite assent, in number and value, of creditors has been obtained. A debt so proved cannot be allowed to influence the question of discharge in any way. Cases cited: Be Borst, 11 N. B. R. 96; Be J)erby, 12 N. B. R. 241; Be Antisdel, 18 N. B. R. 290, 298.
In Banktuptc)'. Wm. M. Randolph, for bankrupt. Humes & Poston, contra. HAMMOND, D. J. The petition for discharge having been filed the fourth day of January, 1879, was assigned for the hearing before the register at Trenton, when and where all creditors were notified by publication, as required by law, to attend and show cause why the discharge should not be granted; the same time and place was appointed for the second and third meetings of creditors. No debts' had at that time been proved, nor did any creditors appear at this meeting either to prove their debts or to oppose the discharge. But subsequently, on the ninth of January, 1879, M. L. Meacham & Co. proved their debt and filed it with the register on the twenty-second of January, 1879. The amount of their debt is $1,512.36, upon which the assignee paid all the money in his hands, being the sum of $95. No other creditors have proved their debts. This payment not amounting to 30 per centum of the debt proved, and there being no assent of creditors, the question is whether the bankrupt is entitled to his discharge. register certifies the facts in his final report, and submits the question. For the bankrupt it is insisted that the debt proved cannot be counted because the proof. was made and filed after the day to show cause; that while it may be true that a creditor may prove at any time before final distribution for the purv.5,no.8-46