In re Filmar

• Decision Date: 04 January 1910
• Docket Number: 1,592.
• Citation: 177 F. 170
• Parties: In re FILMarch v. KLOSTERMAN. LIPPINCOTT et al.
• Court: U.S. Court of Appeals — Seventh Circuit

177 F. 170

In re FILMarch

LIPPINCOTT et al. v. KLOSTERMAN.

No. 1,592.

United States Court of Appeals, Seventh Circuit.

January 4, 1910

William Street, for appellants.

James Rosenthal, for appellee.

Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges.

BANKER Circuit Judge.

Swigert a merchant tailor, in October, 1905, sold a third interest in his business to Filmar. The firm of Swigert & Filmar continued the business till January 8, 1906, when Swigert sold his interest to Filmar in consideration of a small money payment and Filmar's agreement to pay the partnership debts and save Swigert harmless therefrom. Partnership assets were then in excess of partnership debts. By payment and novation Filmar very shortly settled all partnership debts except one to appellant Lippincott. Lippincott refused to accept Filmar as debtor in place of the partnership, and proceeded to press Filmar for payment. Filmar, by various promises and representations, warded off Lippincott until February 20, 1906, when he filed his voluntary petition in bankruptcy. The property scheduled by Filmar and turned over to the trustee had all been property of the partnership. The scheduled debts were all separate individual debts of Filmar's except the debt to Lippincott. Thereupon Lippincott filed his petition, asking that his debt be paid from the assets ahead of the claims of Filmar's individual creditors; and Swigert filed a like petition asking the same relief, without offering to repay the consideration he received on selling his interest to Filmar. The final decree dismissed these petitions for want of equity; and the petitioners have severally appealed.

With the property in custody and all the parties present, and no rights of innocent purchasers or transferees having intervened, a court of general equity powers would concededly award priority to Lippincott, because there had been no application of the property, with the consent of the partners, to the payment of individual debts (Sargent v Blake, 160 F. 57, 87 C.C.A. 213, 17 L.R.A. (N.S.) 1040) because Lippincott in his own right as a partnership creditor would be entitled to equity's rule of distribution, and because Swigert for his own protection would have the right to ask that Lippincott be first paid.

Was there less power in the bankruptcy court? Section 5a (Act July 1, 1898, c. 541, 30 Stat. 547 (U.S. Comp. St. 1901, p. 3424)) declares 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.' Section 5f explicitly adopts the equity rule of administration. Section 5g authorizes the bankruptcy court

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