Meek v. Centre County Banking Co Dale v. Same Breeze v. Same

• Decision Date: 25 May 1925
• Docket Number: Nos. 191-193,s. 191-193
• Citation: 69 L.Ed. 1028,268 U.S. 426,45 S.Ct. 560
• Parties: MEEK v. CENTRE COUNTY BANKING CO. et al. DALE v. SAME. BREEZE v. SAME. Re
• Court: U.S. Supreme Court

268 U.S. 426

45 S.Ct. 560

69 L.Ed. 1028

MEEK

v CENTRE COUNTY BANKING CO. et al. DALE

v. SAME.

BREEZE

v. SAME.

Nos. 191-193.

Reargued Nov. 26, 1924.

Decided May 25, 1925.

Messrs. Ellis L. Orvis, of Bellefonte, Pa., Mortimer C. Rhone, of Williamsport, Pa., and Harry Keller, of Bellefonte, Pa., for petitioners.

Messrs. S. D. Gettig and N. B. Spangler, both of Bellefonte, Pa., for respondents.

Mr. Justice SANFORD delivered the opinion of the Court.

These three cases involve the same proceedings which were before us at an earlier stage in Meek v. Centre Banking Co., 264 U. S. 499, 44 S. Ct. 366, 68 L. Ed. 811. They arose out of a petition in bankruptcy filed by the respondent Shugert in a Federal District Court in Pennsylvania for the adjudication as bankrupts (a) of himself, (b) of a partnership styled the Centre County Banking Co., in which he and the present petitioners, Meek, Dale and Breeze, hereinafter called the defendants, were alleged to be members, and (c) of the defendants individually. The defendants resisted the petition in so far as it sought to have the partnership and themselves adjudged bankrupts, and moved to dismiss it to that extent. Orders denying these motions were entered by the District Court; and these, on petitions to revise, were affirmed by the Circuit Court of Appeals. 292 F. 116. Writs of certiorari were then granted. 263 U. S. 696, 44 S. Ct. 39, 68 L. Ed. 511.

Thereafter, but before the hearing in this court, Shugert died. The defendants then moved in this court that the proceeding in bankruptcy be dismissed as to them, both individually and as members of the partnership, on the ground that to that extent it abated by Shugert's death. Finding the petition to be in this aspect an involuntary and antagonistic proceeding, and there being then no adversary party before the court, we granted leave to any persons claiming to be representatives of Shugert's interest to appear within thirty days and apply for leave to be admitted as parties for the purpose of continuing the proceeding in his stead; stating that if this were done the question whether the proceeding should be dismissed as to the partnership and the defendants, or continued as to them by such representatives, would then be determined. Meek v. Centre County Bank, supra, page 504 (44 S. Ct. 366). Thereafter the administrator of Shugert's estate seasonably appeared and applied for leave to be substituted in Shugert's place as the petitioner in the bankruptcy proceeding. The defendants renewed their motions to dismiss; and the cases have been heard both on this preliminary issue and on the merits of the controversy.

The first question to be determined is whether Shugert's death before an adjudication had been made under the petition, abated the bankruptcy proceeding as against the partnership and the individual defendants, or whether it may be continued against them by the administrator of his estate. When either of the parties in any suit in any court of the United States dies before final judgment, the executor or administrator of such deceased party may, in case the cause of action survives by law, prosecute or defend the suit to final judgment. Rev. Stat. § 955 (Comp. St. § 1592). In Schreiber v. Sharpless, 110 U. S. 76, 80, 3 S. Ct. 423, 28 L. Ed. 65, a suit on a federal penal statute, in which the defendant had died before judgment, it was held that whether an action survives and may be continued under this section 'depends on the substance of the cause of action'; and that, since at common law actions on penal statutes do not survive and Congress had not established any other rule in respect to actions on federal penal statutes, the cause of action died with the person of the defendant and the suit could not be continued against his personal representative. We do not think, however, that the doctrine of this case applies to an involuntary proceeding in bankruptcy.

Such a proceeding, not being in the nature of a common-law action, is not abated by any rule of the common law. And while there is no express provision in the Bankruptcy Act¹ that the cause of action survives the death of a petitioner before adjudication, we think that such survivorship accords with the 'substance of the cause of action' and the nature and purpose of a proceeding in bankruptcy, which is not a mere personal action, but is essentially in the nature of a proceeding in rem for the benefit of all the defendant's creditors. And the filing of the petition brings his property into custodia legis, with a view to a determination of his status and the settlement and distribution of his estate. Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 300, 307, 32 S. Ct. 96, 56 L. Ed. 208; Lazarus v. Prentice, 234 U. S. 263, 266, 34 S. Ct. 851, 58 L. Ed. 1305. We conclude that an administrative proceeding of this character, in which the property of the defendant is impounded for the benefit of all of his creditors, does not abate because of the death of the petitioner before adjudication and that its prosecution may be continued by his personal representative. The motions of the defendants to dismiss the proceeding by reason of Shugert's death are accordingly denied; and the administrator is granted leave to be substituted as the petitioner in the proceeding and to prosecute it in his stead.

2. This brings us to the consideration, on the merits, of the motions made by the defendants in the District Court to dismiss Shugert's petition in so far as it sought the adjudication of the partnership and of themselves as bankrupts. The petition combined, in an anomalous and modified fashion, a 'debtor's petition' and a 'partnership petition' (Bankruptcy Forms, Nos. 1 and 2), with other averments. In it Shugert alleged that the partnership was insolvent and owed debts in excess of $1,000; that each of the partners was insolvent and they were unable, jointly or severally, to pay the partnership debts; that he and the partnership were willing to surrender their property for the benefit of their creditors and desired to obtain the benefits of the bankruptcy law; and that the defendants had not offered to join in the petition and he was not informed of their intention in the matter. It did not allege that either the partnership or the defendants had committed any act of bankruptcy. The prayer was that Shugert, the partnership, and the defendants individually, be adjudged bankrupt; that process be served upon the defendants; and that proceedings be had as provided by the bankruptcy law and General Order No. 8.

The defendants, who appeared specially, moved to dismiss the petition as against the partnership and themselves on the grounds, among others, that it was not authorized by the Bankruptcy Act and that the court had no authority under it to adjudge either the partnership or non-consenting partners bankrupt.² The orders of the District Court denying these motions were affirmed by the Circuit Court of Appeals on the ground that the petition was maintainable under section 5 of the Bankruptcy Act (Comp. St. § 9589) and General Order No. 8.

Section 5a of the Bankruptcy Act specifically 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.'

There hence can be no doubt that a partnership may be adjudged a bankrupt as a distinct legal entity. But since the Act does not specify when it may be adjudged a bank rupt, to determine this question reference must be had to the general provisions of the Act, in which, in accordance with section 1(19), being Comp. St. § 9585, the word 'persons' is to be construed as including 'partnerships.' The Act makes provision for only two kinds of petitions upon which a person may be adjudged bankrupt; one, a voluntary petition filed by him; the other, an involuntary petition filed against him by creditors. As to the first, it is provided that any qualified person, except certain specified corporations, may file a petition to be adjudged a voluntary bankrupt, sections 4, 59a (sections 9588, 9643); and as to the second, that creditors having provable claims of a specified amount against an insolvent debtor who has committed an act of bankruptcy within the preceding four...