In re Hansley & Adams
In re HANSLEY & ADAMS
- Proceeding
- district
- Area
- probate
- Panel
- Trippet (author)
Analysis
The court considered a motion to vacate a bankruptcy adjudication of a partnership on the grounds that the individual partners were not simultaneously adjudged bankrupt, and a counter-motion to enter individual adjudications for the partners. The court denied the motion to vacate, granted the counter-motion for the consenting partner, and ordered the partnership trustee to administer the assets of the non-consenting partner.
| What the court decided | The model |
|---|---|
Motion to vacate the partnership bankruptcy adjudication denied“The motion aforesaid will be denied for the reasons stated.” | agree with court The court correctly applied the Bankruptcy Act, which allowed a partnership to be adjudicated bankrupt as an entity without requiring the simultaneous adjudication of its individual partners. The statutory text did not impose such a condition, and the court's interpretation aligns with the legislative intent to allow partnership bankruptcy proceedings to proceed independently of individual partner status. |
Counter-motion to enter individual bankruptcy adjudication for J. E. Adams granted“As to J. E. Adams, the petitioner, an adjudication will be made declaring him to be a bankrupt, and ordering that such adjudication be entered nunc pro tunc, as of the 7th day of June, 1915.” | agree with court The court properly granted the request for the consenting partner, J. E. Adams, to be adjudicated bankrupt. The use of a nunc pro tunc order to align the individual adjudication with the partnership adjudication date was a procedural remedy consistent with the practice approved in the cited authorities (In re Meyer, In re Farley). |
Order directing partnership trustee to administer assets of non-consenting partner H. A. Hansley“The individual assets of Hansley are assets that are subject to the payment of the partnershipi debts, and an order will be made that the trustee elected by the creditors of the partnership take possession of said assets and administer them, unless, upon proper procedure, Hansley is declared a bankrupt, and his creditors elect a trustee.” | agree with court The court correctly determined that Hansley could not be involuntarily adjudicated bankrupt because no creditor petition meeting the statutory requirements had been filed. However, under the Bankruptcy Act and General Order No. 8, the partnership trustee was authorized to administer the individual assets of a partner that were subject to partnership debts, unless the partner was separately adjudicated bankrupt. The court's reliance on the Supreme Court's disapproval of In re Bertenshaw supports this conclusion. |
The order itself: sound — The order is sound because it correctly interprets the Bankruptcy Act to allow partnership bankruptcy without simultaneous individual partner adjudication, properly handles the consenting partner's request, and correctly applies the statutory framework for administering the non-consenting partner's assets. The court cites relevant authorities and distinguishes between voluntary and involuntary bankruptcy procedures appropriately.
Opinion — Trippet
TRIPPET, District Judge.
[1] Hansley and Adams were partners. J. E. Adams, one of the partners, filed a petition to have the partnership and himself declared bankrupts, alleging the proper jurisdictional facts.. The petition also alleged that H. A. Hansley resided in the district and was insolvent. The prayer of the petition is that the partnership, and the members thereof, be declared bankrupts. Hansley opposed the proceedings. Upon the findings of a special master, an order was made in the matter, in the words and figures following :
“At Los Angeles, in said district, on the 7th day of .Tune, A. D. 1915, before the Honorable Benjamin F. Bledsoe, judge of said court in bankruptcy, the petition of Hansley & Adams, a copartnership, that it be adjudged a bankrupt within the true intent and meaning of the acts of Congress relating to bankruptcy, having been heard and duly considered, the said Hansley & Adams, a copartnership, is hereby declared and adjudged a bankrupt accordingly.”
This is not an adjudication that the members of the partnership are bankrupt.
Hansley now moves the court to vacate the adjudication on the ground that there has been no order adjudicating H. A. Hansley and J. E. Adams bankrupts. The contention is made that the partnership cannot be adjudged bankrupt without, at the same time, adjudging the individual members of the partnership bankrupts.
[2, 3] The statute provides that a partnership may be declared bankrupt A partnership is an entity to that extent. The statute does not impose the condition that the partners'shall be declared bankrupt at the same time as the partnership. It is plain that the partnership may be declared a voluntary or involuntary bankrupt. There is no limitation in the statute in this regard. It is well settled that one partner may petition to have the partnership declared a voluntary bankrupt. It is undoubtedly necessary, except in certain cases, that the court should determine that the members of the partnership are insolvent; otherwise the partnership would not be bankrupt. Bankruptcy and insolvency are different things under the statute. There are many instances that could be stated that would defeat the statute authorizing a partnership to be declared bankrupt, if it were necessary before doing so to adjudicate the members thereof bankrupts. The language of the statute does not justify an inference that Congress meant that a partnership could not be declared bankrupt without adjudication of the partners to be bankrupt. The motion aforesaid will be denied for the reasons stated.
There is a counter motion in the cause that an adjudication of the members of the partnership be now made and that the adjudication be entered nunc pro tunc. As to J. E. Adams, the petitioner, an adjudication will be made declaring him to be a bankrupt, and ordering that such adjudication be entered nunc pro tunc, as of the 7th day of June, 1915. The belter practice is to file a separate petition, i. e., one for the partnership and one for each partner who. desires to go through bankruptcy, but the practice adopted here has been approved. In re Meyer, 98 Fed. 979, 39 C. C. A. 368; In re Farley (D. C.) 115 Fed. 359.
*566[4, 5] There are authorities to the effect that a proceeding like this might be regarded as an involuntary proceeding as to the nonconsent-ing partner. There is only one method in the statute for the institution of an involuntary bankruptcy proceeding, namely, by the petition of a creditor or creditors, stating certain jurisdictional facts. No such petition has been hied herein, and frpm the master’s report it does not appear that Hansley is indebted to the amount of $1,000, and therefore he could not be declared an involuntary bankrupt. The individual assets of Hansley are assets that are subject to the payment of the partnershipi debts, and an order will be made that the trustee elected by the creditors of the partnership take possession of said assets and administer them, unless, upon proper procedure, Hansley is declared a bankrupt, and his creditors elect a trustee. The opinion in Re Bertenshaw, 157 Fed. 363, 85 C. C. A. 61, 17 L. R. A. (N. S.) 886, 13 Ann. Cas. 986, to the effect that the trustee elected by the partnership creditors cannot administer the estates of the members, has been disapproved by the Supreme Court, and section 5 clearly contemplates this procedure. General Order No. 8 (89 Fed. vi, 32 C. C. A. vi) provides for this course.
• Before arriving at the foregoing conclusions, I examined the following authorities: Francis v. McNeal, 228 U. S. 695, 33 Sup. Ct. 701, 57 L. Ed. 1029; Still’s Sons v. American National Bank, 209 Fed. 749, 126 C. C. A. 473; In re Samuels, 215 Fed. 845, 132 C. C. A. 187; In re Forbes (D. C.) 128 Fed. 137; Vaccaro v. Security Bank of Memphis, 103 Fed. 436, 43 C. C. A. 279; In re Bertenshaw, 157 Fed. 363, 85 C. C. A. 61, 17 L. R. A. (N. S.) 886, 13 Ann. Cas. 986; In re Meyer, 98 Fed. 979, 39 C. C. A. 368; and many others.