In re Turnock & Sons

• Citation: 230 F. 985
• Decision Date: 04 January 1916
• Docket Number: 2270.
• Court: U.S. Court of Appeals — Seventh Circuit
• Parties: In re TURNOCK & SONS. v. HIBBARD, SPENCER, BARTLETT & CO. TURNOCK et al.

230 F. 985

In re TURNOCK & SONS.

TURNOCK et al. v. HIBBARD, SPENCER, BARTLETT & CO.

No. 2270.

United States Court of Appeals, Seventh Circuit.

January 4, 1916

James Turnock, of Chicago, Ill. (Hughes & Arnold, William E. Wider and Edward B. Zigler, all of Elkhart, Ind., of counsel), for petitioners.

James H. State, of Elkhart, Ind., for respondent.

Before KOHLSAAT, MACK, and ALSCHULER, Circuit Judges.

MACK Circuit Judge.

On October 22, 1914, Turnock & Sons, a partnership, was dissolved, and the property, worth $3,500, was divided among the members of the firm, all residents of Indiana. The firm liabilities were $11,000. Each partner knew of the insolvency. The dissolution was for the express purpose of enabling each of them to claim $600 exemptions, and for no other purpose. On October 30, 1914, one of them filed his voluntary petition in bankruptcy, and an involuntary petition was filed to have the firm adjudged bankrupt. Adjudications followed as to the firm and each member individually. The individual assets were merely nominal.

The question arising on the petition to review and revise is whether the referee and the District Court erred in sustaining the firm creditors' objection to the report of the trustee setting off to each partner for exemptions certain property which had belonged to the firm and which in the dissolution division had been apportioned as between them.

While by the express provision of Bankr. Act, Sec. 6, the state law is controlling as to the character and amount of exemptions to be allowed to a bankrupt, the distinction between firm and individual property in the administration of a bankrupt estate is to be determined as a matter of general law in the federal courts, irrespective of the views of the state court of the bankrupt's domicile, in equity or under insolvency acts.

In re Filmar, 177 F. 170, 100 C.C.A. 632, we held that as to the former firm assets coming into the possession of a trustee in bankruptcy a firm creditor is entitled to priority as against individual creditors of a bankrupt partner who had bought out his copartner a month before and had assumed the firm debts. For the purposes of administration, such assets despite dissolution are to be considered partnership property. In re Mayou, 4 De Gex, J. & S. 664. No reason is apparent for a different rule as between the bankrupt and his creditors. And as Indiana (Goudy v. Werbe, 117 Ind. 154, 160, 19 N.E. 764, 3 L.R.A. 114), unlike Wisconsin ...