In re Bertenshaw

157 F. 363, 17 L.R.A.N.S. 886, 17 L.R.A (N.S.) 886, 1907 U.S. App. LEXIS 4813
CourtCourt of Appeals for the Eighth Circuit
DecidedNovember 19, 1907
DocketNo. 83
StatusPublished
Cited by32 cases

This text of 157 F. 363 (In re Bertenshaw) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Bertenshaw, 157 F. 363, 17 L.R.A.N.S. 886, 17 L.R.A (N.S.) 886, 1907 U.S. App. LEXIS 4813 (8th Cir. 1907).

Opinions

SANBORN, Circuit Judge

(after stating the facts as above). Tin-adjudication in bankruptcy in this case is a distinct judgment that the partnership is a bankrupt, and that none of the partners is a bankrupt. This decision has not been challenged by appeal, those issues are now res ad judicata, and the only question here is, may the bankruptcy court in the administration of the estate of a bankrupt draw to itself and apply to the payment of partnership creditors individual property of solvent partners, none of whom has been adjudged a bankrupt?

There are two conceptions of a partnership, one springing from the agreement on which it is founded, that it is an aggregation of persons associated together to share its profits and losses, owning its property, and liable for its debts. The other that it is an artificial being, a distinct entity separate in estate, in rights, and in obligations from the partners who compose it. In most of its relations to persons and things the latter conception is the more accurate. The Supreme Court of Vermont in 1878, in Walker v. Wait, 50 Vt. 668, 676, declared that:

“A partnership or .joint-stock company is just as distinct and palpable an entity in the idea of the law, as distinguished from the individuals composing it, as is a corporation ; and can contract as an individualized and unified party, with an individual person who is a member thereof, as effectually as a corporation can contract with one of its stockholders. The obligation and the liability, inter partes, are the same in the one case as the other. The only difference is a technical one, having reference to the forum and form of remedy.”

Judge Cooley in Robertson v. Corsett, 39 Mich. 784, said in the same year:

“The partnership for most legal purposes is a distinct entity, having its own property capable of contracting separate debts, having the right to sue in equity its several members, and to be protected against their conduct to the same extent that it might be against the conduct of strangers.”

Judge Brewer, now Mr. Justice Brewer of the Supreme Court, said in 1876 in Cross v. National Bank, 17 Kan. 340:

“Where one joins a partnership, as in this case, he makes himself a part of- an entity already existing, which has acquired certain property and business and in acquiring it has incurred certain indebtedness. The firm owns the property, holds the business, and owes the debts.”

Thus it may be seen that the conception of the partnership as a distinct entity, separate in estate and obligations from each of the partners and from the individual estates and obligations of each partner, was an established and approved legal conception years before the act of 1898 was passed. Congress embodied this conception of a partnership in the bankruptcy law of 1898 by these clear provisions:

[366]*366Section-1 (19):

“ ‘Persons’ shall include corporations, except where otherwise specified, an<3 officers, partnerships and women.” Act. July 1, 1898, c. 541, 30 Stat. 545 [U.‘ S. Comp. St. 1901, p. 3419.]

Section 5:

“Partners, (a) A partnership, during the continuance of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt.
“(b) The creditors of the partnership shall appoint the trustee; in other respects so far as possible the estate shall be administered as herein provided for other estates.
“(c) The court of bankruptcy which has jurisdiction of one of the partners may. have jurisdiction of all the partners and of the administration of the partnership and individual property.
“(d) The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners.
“(e) The expenses shall be paid from the partnership property in-such proportions as the court shall determine.
“(f) The net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and the net proceeds of the individual estate of each partner to the payment of his individual debts. Should any surplus remain of the property of any partner after paying his individual debts, such surplus' shall be added to the partnership assets and be applied to the payment of the partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual partners in the proportion of their respective interests in the partnership.
“(g) The court may permit the proof . of the claim of the partnership estate against the individual estates, and vice versa, and may marshal the assets of the partnership estate and individual estates so as to prevent preferences . and secure the equitable distribution of the property of the several estates.
“(h) In-the event of one or more but not all of 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.” 30 Stat. 547, 548, c. 541 [U. S. Comp. St. 1901, p. 3424].

No express provision can be'found in this legislation and no indication or implication is perceived in it that an adjudication of a partnership draws- into the administration of its estate in the court of bankruptcy the property of the solvent partners who are not adjudged bankrupts. On the other hand, every provision of it is consistent with the retention and administration of their individual property by the unadjudicated partners, an(i many of them are utterly inconsistent with the administration of these individual estates by the bankruptcy court. Clause “c” provides that the court of bankruptcy which has- jurisdiction of one of the partners may have jurisdiction of all of the partners and of the administration of the partnership and individual property. The unavoidable inference is that the court of bankruptcy, which does not have jurisdiction of any of the partners, cannot have jurisdiction of all of the partners and of the administration of both the partnership and the individual property. Nor is the reason for this provision difficult to perceive. Section 5 treats exclusively of bankrupt partnerships and their members. It does not deal with solvent partnerships that have committed no act of bankruptcy, nor does it subject partnerships to adjudication in bankruptcy solely because some of' their members have [367]*367been adjudged bankrupts. A member of a partnership may be adjudged bankrupt when the partnership cannot be, and in such a case the bankruptcy court has no jurisdiction of the partnership property.

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Cite This Page — Counsel Stack

Bluebook (online)
157 F. 363, 17 L.R.A.N.S. 886, 17 L.R.A (N.S.) 886, 1907 U.S. App. LEXIS 4813, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-bertenshaw-ca8-1907.