In re Kuntz

JOHNSON, District Judge. Exceptions have been filed to tbe report of tbe master in finding and deciding that Charles Z. Stougb was a member of tbe partnership, or firm, trading as tbe Consumers’ Coal Company. The facts of tbe ease, briefly stated, are as follows: An involuntary petition in bankruptcy was filed on November 2, 1927, against William J. Kuntz, Charles Z. Stougb, and Kathryne E. Kuntz, trading las tbe Consumers’ -Coal Company. Separate answers were filed by each of the said alleged partners. William J. Kuntz denied that he was a member of tbe partnership, and alleged that be had withdrawn from tbe partnership on April 2, 1923. Charles Z. Stougb denied that be was a member of the partnership, and alleged that be bad withdrawn from the partnership on August 29, 1921. Kathryne E. Kuntz admitted that she was a member of the partnership, but denied that tbe partnership was insolvent. Tbe issues raised by tbe petition and the answers were referred to Wm. Kurtz, referee in bankruptcy, to take testimony and make report thereon, together with bis findings of fact and conclusions of law. Tbe referee filed bis report as special master, in which be finds that tbe partnership is insolvent, and that William J. Kuntz, Charles Z. Stough, and Kathryne E. Kuntz were partners within tbe purview of tbe Bankruptcy Act, and recommended that William J. Kuntz, Charles Z. Stougb, and Kathryne E. Kuntz, trading [199] as the Consumers’ Coal Company, be adjudged bankrupt. To this report and recommendation Charles Z. Stough alone filed exceptions which are now before this court for disposition. These exceptions raise the question whether Stough was a member of the partnership at the date of the petition in bankruptcy. From the testimony taken before the master, it appears that on August 20, 1921, the three partners filed a certificate in the prothonotary’s office in York county, under the provisions of the Fictitious Name Act (Pa. St. 1920, § 15968 et seq.), setting forth that they were trading and doing business as the Consumera’ Coal Company. On August 29, 1921, Stough assigned all his interest in the partnership to his partners, but no notice of his withdrawal was given, nor was there any notation made on the record in the prothonotary’s office in York county of his withdrawal from the partnership or of his assignment. The master found that Stough was a mem- ■ ber of the partnership at the date of the petition in bankruptcy, for the reason that no notice was given of his assignment or withdrawal from the partnership, and recommended that William J. Kuntz, Charles Z. Stough, and Kathryne E. Kuntz, trading as the Consumers’ Coal Company, be adjudged bankrupt. In this finding and recommendation the learned referee was in error. Section 5a of the Bankruptcy Act, 11 USCA § 23(a), provides that “A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt.” On the date of the petition, Stough was not in fact a member of the partnership and therefore he could not be adjudged a bankrupt as a part of, or a member of, the partnership. “Only an actual partnership may be adjudicated bankrupt as a partnership, not one ‘by holding out’ and only those who are actual partners may be included, not • those who are partners merely ‘by .holding out.’ ” 1 Remington on Bankruptcy, § 71, p. 115. In re Beckwith & Co. (D. C.) 130 F. 475, 12 A. B. R. 453, it was held that “A partnership in faet must be shown to maintain involuntary proceedings against one as a partner and not a mere holding out, by which he may become liable to creditors as a partner.” On page 454 (130 F. 476) of the opinion in the above case Arehbald, District' Judge, said: “To maintain the proceedings as to Jones a partnership in faet must be shown, and not a mere holding out, by which he may have become liable to creditors. Collier on Bankruptcy (4th Ed.) 61; In re Clark (D. C.) 7 A. B. R. 96, 111 F. 893; Lott v. Young [C. C. A,] 6 A. B. R. 436, 109 F. 798. Otherwise the proceedings might be good as to some creditors, with respect to whom this was true, and not as to others, as to whom it was not. And we should also have instances where there was no joint estate to administer, nor any assets other than the personal liability of the individuals who had made themselves answerable, a condition which plainly is not contemplated by the Bankrupt Act. In re Kenney [D. C.] 3 A. B. R. 353, 97 F. 554." In Jones v. Burnham, Williams & Co. (C. C. A.) 138 F. 986, 15 A. B. R. 85, it was held that, “where in involuntary proceedings against three persons as alleged partners, one of them interposes an answer denying the alleged partnership, the burden of proof is upon the petitioners to show that a partnership in faet existed between the alleged bankrupts.” In Buffalo Milling Co. v. Lewisburg Dairy Co. (D. C.) 159 F. 319, 20 A. B. R. 279, it was held that “a partnership in faet must be shown to maintain proceedings in bankruptcy against one as a partner.” In re Kaplan et al., 234 F. 866, 37 A. B. R. 104, it was stated in the opinion of the Circuit Court of Appeals for the Seventh Circuit: “To justify the adjudication there must be evidence from which the court could properly find as a fact that Samuel Kaplan was a partner. It would not be enough that to various creditors he had held himself out as a partner, because, while an estoppel might give rights to those who were misled, in order to give rights to all creditors he must have been in faet a partner.” It might be well to state that personal liability by estoppel is fixed by section 16, part 3, of the Uniform Partnership Act of Pennsylvania of March 26, 1915, P. L. 18 (Pa. St. 1920, § 16611). From the foregoing authorities, it is necessary to sustain the exceptions to the master’s report and to adjudicate the Consumers’ Coal Company, composed of William J. Kuntz and Kathryne E. Kuntz, as members of the partnership, bankrupt, eliminating the name of Charles E. Stough as a partner. And now May 31, 1929, the exceptions to the report of the master -are sustained, and the Consumers’ Coal Company, composed of William J. Kuntz and Kathryne E. Kuntz, will be adjudicated bankrupt.