In re Ervin

109 F. 135, 1901 U.S. Dist. LEXIS 191

• Court: District Court, E.D. Pennsylvania
• Decided: June 10, 1901
• Docket: No. 809
• Status: Published

Opinion

J. B. McPHERSON, District Judge.

I think the referee was clearly right in refusing to permit the claimant to share in the fund for distribution until the general creditors are paid. The claimant, although a corporation, was a partner de facto of the bankrupt Arm, and the transactions now in controversy were executed transactions. This being true, I see no reason why the court should now help the corporation to undo what may be assumed to have been unlawful acts, or why the corporation should be regarded as if it bad not really done what it now says was wrong. It signed a partnership agreement; advanced money to the Arm in accordance with the agreement, and in furtherance of the partnership purposes, although, no doubt, in excess of the amount originally agreed upon, the excess being sometimes loosely, but, so far as general creditors are concerned, incorrectly, called "loans”; sold goods to the partnership, of which it was a member; and now asks a court of equity to say that nearly all of these voluntary completed acts should be treated as if they were uncompleted, and as if the bankrupts were seeking to compel the corporation to step outside the circle of its corporate powers. There is a sound difference between ultra vires acts already done and such acts still in the doing, and this is a case, I think, where the distinction may be properly applied. The ultra vires acts of the claimant, undoubtedly helped to induce the general creditors to extend credit to the bankrupts, and the claimant should not now be permitted to repudiate these acts, and transform itself, by virtue of its own wrongdoing, from a partner into a general creditor.

The disallowance of the claim is approved.