In re Meyer

¶25*978WALLACE, Circuit Judge.

¶26Upon tlie petition of the creditors of the partnership of Meyer & Dickinson against Henry L. Meyer and Joseph R. Dickinson, as the surviving members, and the answers of the surviving members, the court below adjudicated the partnership and Henry L. Meyer individually bankrupts. The facts alleged and admitted were these: Prior to August 14, 1898, Charles H. Meyer,- Henry L. Meyer, and Joseph R. Dickinson were partners in trade at Philadelphia and Hew York under the firm name of Meyer & Dickinson. Charles H. Meyer died August 14, 1898. August 19, 1898, Henry L. Meyer, as liquidating partner; executed to Charles W. Sparhawk an assignment of all the assets of the partnership, without preferences, for the beneiit of its creditors. At the time the partnership was insolvent. Dickinson had not contributed any capi-ial, and did not participate in the management of the partnership, and was not consulted, and did not expect to be consulted, about the assignment. The assignment was duly recorded in Philadelphia and Hew York; and Sparhawk accepted the assignment, and proceeded to collect the assets transferred.

¶27The appellants insist that no act of bankruptcy was established; that the assignment was not a general assignment by either of the parties, or a valid one by the partnership; that Meyer was improperly adjudged a bankrupt; and that, as neither partner should have been adjudged a bankrupt, the court was without authority to adjudge the partnership bankrupt.

¶28By the provisions of section 5 of the bankrupt act, “a partnership,' during the continuance of the business, or after its dissolution and before the final settlement of its business, may be adjudged a bankrupt,' and jurisdiction of all the partners and the administration of the partnership and individual property is conferred upon any court of bankruptcy having jurisdiction of one of the partners. The section provides that the creditors of the partnership shall appoint the trustee; that the trustee shall keep separate accounts of the partnership property and of the individual property; that the expenses shall be paid from the partnership property and the individual property in such proportion as the court may determine; and that the net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and any surplus added to the assets of the individual partners, and the net proceeds of the individual estate of each partner shall be appropriated to the payment of his individual debts, and any surplus to the payment of the partnership debts. It authorizes the partnership estate to prove against the individual estates, and vice versa, and directs the assets of the partnership estate and the individual estates to be marshaled so as to prevent preferences, and secure the equitable distribution of the property of the several estates. It further provides that the property of a partnership shall not be administered in bankruptcy when less than all the members are adjudged bankrupt; and in that event the partner not adjudged bankrupt is to settle the partnership business expeditiously, and account for the interests of the adjudged bankrupt. The last provision applies to a proceeding by or against one partner, or any number less than all, *979and means that the bankruptcy of one partner shall not preclude the other from settling the partnership business, and, like those immediately preceding it, is merely declaratory of a recognized equitable principle of administration in bankrujjtcy. Amsinck v. Bean, 22 Wall. 403, 22 L. Ed. 801; Murray v. Murray, 5 Johns. Ch. 60; Colly. Partn. 854.

¶29We are of the opinion that it is the scheme of these provisions to treat the partnership as an entity which may be adjudged a bankrupt by voluntary or involuntary proceeding, irrespective of any adjudication of the individual partners as bankrupt, and upon an adjudication to draw to the administration the individual estates of the partners as well as the partnership estate, and marshal and distribute them according to equity. The assets of the individual estates and the debts provable against them can be ascertained without adjudicating the individual partners bankrupt. The language; does not require such an adjudication. The section is silent resisting a discharge of the partners individually. It does not, by terms or by implication, preclude an adjudication of the individual partners as bankrupt in the partnership proceeding; and, if there is such an adjudication, there is nothing to prevent the partners from receiving a discharge individually, if they are otherwise entitled to it under the act. But, as the commission of an act of bankruptcy is indispensable to jurisdiction in an involuntary proceeding, the individual members cannot be adjudged bankrupts in such a proceeding who have not committed, or been participants in committing, one of the enumerated acts.

¶30Section 5 differs significantly in its phraseology from that of the former acts in regard to the bankruptcy of partners. It takes the place of section 14 of the bankruptcy act of 1841, and of section 3(5 of ihe bankruptcy act of 18(57. These sections of the earlier acts authorized an adjudication of bankruptcy of “persons who are partners in trade,” instead of “a partnership”; and, while providing for the administration of the joint and separate estates substantially like section 5, provided, as section 5 does not, for granting or refusing a discharge to each partner. By the language of these acts, it was a prerequisite that all the persons comprising the partnership should be adjudged bankrupt before the warrant could issue entitling the assignee to administer the joint estate, and the provisions respecting a discharge show that such an adjudication was contemplated.

¶31The differences indicate that congress intended that a partnership should be, for the purpose of the bankrupt act, in all respects “a person,” as defined by section 1, entitled to a discharge under section 14, and subject to be adjudged a bankrupt in involuntary proceedings if it has committed any of the acts of bankruptcy specified in section 3. There are many provisions in the act which refer to the personal immunities and duties of bankrupts, and are not applicable to an entity like a partnership, hut these are equally inapplicable to a corporation.

¶32Under the former acts, there could not be an adjudication of all the partners unless a joint act of bankruptcy had been committed, *980and consequently there could be no administration of the joint effects (see Redmond v. Martin, 9 N. B. R. 408, Fed. Cas. No. 11,632); and cases arose in which creditors were without an adequate remedy, it may haye been the purpose of congress in the present act to cure the defect. As we interpret it, the present case affords an illustration of the better efficacy of its provisions; for, if it were necessary that Dickinson be adjudged, he could not be, as he did not participate in making the assignment, and consequently the partnership could not be adjudicated.

¶33In the present case the partnership made a general assignment for the benefit of creditors, and by section 3 such an assignment is an act of bankruptcy, although made without preferences, without actually intending to defraud creditors, and without insolvency. In re Gutwillig, 34 C. C. A. 377, 92 Fed. 337; West Co. v. Lea, 174 U. S. 594, 19 Sup. Ct. 836,

¶34As the assignment purported to transfer all the property of the partnership, it was a general assignment by the partnership, though, as it purported to transfer only their joint, and not their individual, property, it was but a partial assignment by the individual partners. Whether, having been made by one partner only, it was valid, void, or voidable is immaterial. Apparentiy the partner who did not join has ratified, by acquiescence, the act of the partner who executed it. However this may be, in denominating the making of a general assignment for the benefit of creditors an act of bankruptcy, congress did not make any distinction between valid or invalid instruments, but used terms which would reach the execution of any instrument which is, or purports to be, a general assignment. The majority of the court are of the opinion that the making of the assignment by Meyer, being an act of bankruptcy of which he was the author, entitled the creditors to an adjudication against him individually.

¶35The appellees have insisted that the appellants are not entitled to be heard upon the questions which have been discussed. The appellants Marcuard, Krauss & Co. are creditors of the partnership; and, by the terms of section 18, any creditor may appear and plead to the petition in involuntary bankruptcy. The other appellant, Sparhawk, the assignee under the general assignment, was certainly entitled to contest the adjudication, as his title may be prejudiced by the proceeding. In re Mendelshon, 12 N. B. R. 533, Fed. Cas. No. 9,420; in re Hatje, 12 N. B. R. 548, Fed. Cas. No. 6,215; In re Bergeron, 12 N. B. R. 385, Fed. Cas. No. 1,342; In re Jack, 13 N. B. R. 296, Fed. Cas. No. 7,119; In re Williams, 14 N. B. R. 132, Fed. Cas. No. 17,706; In re Scrafford, 14 N. B. R. 184, Fed. Cas. No. 12,557.. The court below permitted the appellants to intervene and be heard, and they have an undoubted right to review an adverse decision.

¶36The adjudication of the district court is affirmed, with costs.