Corey v. Perry

Appleton, C. J. The bankrupt law of the United States provides for the discharge of individuals from individual debts and of partners from the debts of the firm. The assets of the individual cannot be diverted from the payment of individual debts to the payment of firm debts, nor can those of the firm from firm debts to the payment of individual debts. The individual estate and its assets and liabilities and the firm estate and its assets and liabilities are kept separate and distinct, so that the creditors of the firm and of the individuals composing it may receive equal and exact justice. The twelfth rule of the district court of the United States for the district of Maine, is as follows: “Whenever a debtor shall desire to be discharged from his liabilities as a member of a co-partnership, as well as from his individual indebtment, Form No. 1, as [143] prescribed by the rules and orders of the supreme court, shall be altered by setting forth therein a description of such firm, with the names and places of residence of the co-partners and shall pray for the discharge of the petitioner from his liabilities as member of such firm.” The propriety and justice of this rule are apparent. The petitioners for a discharge in bankruptcy should clearly state from what debts they desire to be discharged: if as individuals, that they desire a discharge from individual liabilities; if as members of a firm, that they desire a discharge from partnership liabilities, or from partnership and individual liabilities. The defendant, James C. Perry, was a member of tire firm of Perry & Dunn. In his petition he desired only to be discharged as an individual. He did not set forth that he was a member of any firm. He petitioned for no discharge from firm debts. He set forth no firm liabilities and disclosed no firm assets. The firm of Perry & Dunn has not been declared bankrupt. It has not been before the district court sitting in bankruptcy nor within its jurisciction. Is then the discharge of Perry a discharge from the firm debts as well as from his individual liabilities ? In Re William. H. Little, 1 Bankr. Reg. 341, Little had been a partner with one Dana, and commenced voluntary proceedings in bankruptcy in bis own name. In his schedules the debts and assets of tbe firm of Little & Dana were mentioned, and the petitioner prayed to be discharged from all his debts, blit fearing that by such proceedings he would not be discharged from tbe debts of Little & Dana, he asked tliat his proceedings might be so amended that Dana might be made a party and cited to show cause why the firm of Little & Dana should not be declared bankrupt. Upon this question of amendment, Blatchford, J. says “Under these circumstances, as the petitioner prays to be discharged from all his debts provable under tbe act, and some of tbe debts set forth in the schedule annexed to his petition are debts of the said firm, and as this petition is one to have the firm declared bankrupt on the petition of its partners, within the provision of section 36 of the act and of general order No. 18, as Dana did not join with Little in his (original) petition, he ought to have been brought in [144] by proper proceedings under general order No. 18, before an adjudication of bankruptcy was made on the petition of Little; the defect is now sought to be remedied by Little. His petition requires to be amended. When he is so brought in, he (Little) can be discharged from the debts of the firm because the theory and intent of § 36 of the act and general orders Nos. 16 and 18 are, that the creditors of a firm shall be required to meet, but once and in our bankruptcy forum, all questions in regard to the bankruptcy of the firm and in regard to debts against the firm.” In Amsinck v. Bean, 22 Wall. 395, it was decided that the assignee in bankruptcy of the estate of an individual partner of a debtor co-partnership could not maintain a suit to recover hush money previously paid to a creditor of the co-partnership, upon the ground that the money was paid to such creditor’in fraud of the other creditors of the firm, and in fraud of the provisions of the bankrupt act. The suit should be by the assignee of the firm. So that in this case, the assignee of Perry could not have collected any of the assets of Perry & Dunn. The firm debts should not be discharged when the firm creditors could not possibly have their share of its assets. The firm assets were never before the bankrupt court. Neither were the firm debts. “It is difficult,” remarks Drummond, J., In Re Noonan, 3 Biss. 491, “to see how any member of the firm can be released from his personal liabilities as such without the court substantially looking into all the transactions of the firm and settling up its affairs. A man cannot be discharged from his liabilities as a member of the firm unless the debts and assets of the firm are considered and adjudicated upon by the court.” The fact that persons have been adjudicated bankrupts as members of one firm is no bar to nor does it defeat a petition against them as pai'tners with others in another firm. In Re Jewett, 16 Bankr. Reg. 48. In Hudgins v. Lane, 11 Nat. Bankr. Reg. 463, it was decided that the discharge of a member of a firm upon his individual petition in bankruptcy, and without any proceedings by or against the firm, does not discharge such member from the partnership debts. See also Compton v. Conkling, 15, N. B. R. 417. The conclusion is that Perry has not been discharged from his partnership debts. Exceptions overruled. Walton, Barrows, Virgin, Peters and Libbey, JJ., concurred.