Houchen v. Gadberry (In Re Gadberry)

OPINION AND ORDER BASIL H. COUTRAKON, Bankruptcy Judge. The cause comes for hearing upon the Motion to Dismiss filed by William D. Hardy and G. & H. Disposal Company, a partnership, objecting to the Trustee’s Complaint to sell debtor’s interest in the partnership. The reasoning in this matter is clear from Illinois law. Section 31(5) of the Partnership Act (Ill.Rev.Stat.1981, ch. 106V2, par. 31(5)) mandates dissolution of a partnership “by the Bankruptcy of any partner...” That dissolution, inter alia, terminates the authority of partners to act for the partnership (section 33), no longer binds the partnership by any act of a partner (section 35(3)) and allows only the remaining, non-bankrupt, partner to wind up the partnership affairs (section 37). There is no prohibition in either Illinois law or current Federal Bankruptcy law to the conveyance of the interest of a partner after dissolution has occurred. *14 Nevertheless the Partnership Act does speak in general about the interest of a partner. “A partner’s interest in the partnership is his share of the profits and surplus, and the same is personal property.” (section 26) The Court can see no reason that this interest should change character after dissolution. Of course the trustee is vested with title to all personal property by virtue of Code section 541. (11 U.S.C. § 541). In fact Code section 541(c)(1)(B) would specifically treat the situation of partnership dissolution by including property “notwithstanding any provision — ... (B) that is conditioned on the insolvency or financial condition of the debtor, on the commencement of a case under this title. Further, section 27 of the Partnership Act speaks of a conveyance of a partner’s interest and allows an assignee to receive his share of profits, but nothing more. Therefore, the Court denies the Motion to Dismiss and holds that the Trustee may sell the debtor’s interest in G. & H. Disposal Company, a partnership.