In re Hathorn

11 F. Cas. 822, 2 Woods 73

• Court: U.S. Circuit Court for the District of Louisiana
• Decided: April 15, 1875
• Status: Published

Opinion

WOODS, Circuit Judge.

It has been held in a case where the facts were almost identical with the facts in this, that one member of a firm is not prevented from calling the partnership into court, and having it declared bankrupt because of the proceedings in the state court. In re Noonan [Case No. 10,292). The inference is inevitable, that the bankrupt court has the right in such case to administer the bankrupt property, notwithstanding the order of the state court placing it in the hands of a receiver. It seems to me, that the position taken by respondent is equivalent to a denial of the power of the bankrupt court to adjudge a firm bankrupt, and administer its assets, if one of the members has applied to the state court for the settlement óf the partnership and the appointment of a receiver: in other words, that a failing firm may defeat the operation of the bankrupt act [of 1S67 (14 Stat. 517)], by applying to a state court to settle its affairs and distribute its assets. “The design and purpose of the bankrupt law' is, that the property of insolvents shall be secured to their creditors in the very mode pointed out thereby, with all the facilities for its appropriation, all the security for its administration, all the safeguards against fraud, all the protection against device to establish false claims, fictitious debts and illegal or inequitable preferences, which that act provides, and in the summary manner in which the proceedings are required to be conducted. It is not, therefore, for the debtors, or for the debtors and some of the creditors, to say, we can devise a better, or safer, or more economical mode of reaching the same final result. If it were true, it would be only saying, we will resort to an expedient to defeat the bankrupt law. and our reason therefor is, that we think our plan is wiser and better than that which congress has seen fit to prescribe.” Woodruff, Circuit Judge, in Re Bininger [Case No. 1,420], See, also, Thornhill v. Bank [Id. 13,992]; In re Merchants’ Ins. Co. [Id. 9,441]; In re Independent Ins. Co. [Id. 7,017]; In re Safe Deposit Institution [Id. 12,211]. This is not the case where a cred-iior is proceeding in a state court to enforce his claim against the property of his debtor, and has had a receiver appointed before the proceedings in bankruptcy were commenced, but it is the case of a member of a firm against which a petition in bankruptcy is pending, seeking to have the assets of the firm administered by the state court for his own benefit and that he may enforce his individual claim to the partnership assets against his copartners. To hold that such a proceeding bars thd action of a court of bankruptcy, or protects the assets of the firm ' from administration in the bankrupt court, would be to allow all copartners at their option to defeat the bankrupt law, and transfer the power and jurisdiction of the bankrupt courts to the state courts in all t‘ases of the insolvency of partnerships. In my judgment, the assets of this firm ought to be preserved by the order of the bankrupt court to await the result of the trial of the issue of bankruptcy vel non, and the injunction ought to issue to restrain Hathorn iis prayed for in the petition of the assignees. Ordered accordingly.