Mills v. J.H. Fisher & Co.
| Decision Date | 11 March 1908 |
| Docket Number | 1,740. |
| Citation | 159 F. 897 |
| Parties | MILLS v. J. H. FISHER & CO. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Wm. W Goodwin, for appellant.
A. W Biggs, for appellee.
Before LURTON, SEVERENS, and RICHARDS, Circuit Judges.
The court below sustained the demurrer and dismissed a petition praying an adjudication of bankruptcy against the defendants. From this judgment the petitioners have appealed.
The objection that the appeal was too late is not well founded. Before the 10 days allowed for an appeal had expired a petition to rehear was filed. Within 10 days after this was disposed of, and the judgment thereby made final, this appeal was prayed and allowed. This was in time. In re McCall, 145 F. 898, 76 C.C.A. 430. The case of Conboy v. First National Bank, 203 U.S. 141, 27 Sup.Ct. 50, 51 L.Ed. 128, is not applicable. The petition to rehear was filed after the time for an appeal had expired and the right of appeal could not be resuscitated by an application to rehear.
The petitioner and appellant is a corporation in the cotton milling business in South Carolina. The petition averred that J. H. Fisher and Henry Fisher were partners, under the name and style of 'J. H. Fisher & Co.,' carrying on business at Memphis, Tenn.; that J. H. Fisher resided at Memphis; but that the other partner resided without the district. It is averred that this firm is indebted to the petitioner in a sum in excess of $500 over and above any security for the claim, and that the creditors of the firm are less than 12 in number. It is averred that the firm and its individual members were insolvent at the date of the acts of bankruptcy alleged, and continue so to be. To this petition J. H. Fisher, the only member of the firm served with process, appeared, and for the firm of J. H. Fisher & Co. and for himself as an individual member demurred, principally upon the ground that no act of bankruptcy is averred as having been committed either by the firm or by J. H. Fisher as a member thereof.
The act of bankruptcy relied upon consists in the transfer by J. H. Fisher of 'substantially his entire property' to his son, George W. Fisher, for the 'recited consideration' of $10,000 due to the grantee for services rendered and money loaned and '$5,000 cash in hand paid.' The petition in respect of this says:
'But it does not appear to whom or of what kind the services were rendered, or to whom the money was loaned, and the petitioner will ask leave to show that the loan of money and services were for the firm of J. H. Fisher & Co. and the debt was a firm debt.'
The transfer is not attacked as fraudulent, but as a transfer operating as a preference given within four months. The property transferred was the individual property of J. H. Fisher. It is averred that the firm and each member were insolvent; that the firm had never had any capital or assets in their business, but carried on the business of buying and selling cotton upon credit-- the property and credit of J. H. Fisher being the one resource of the firm for credit. Upon this statement of facts it is contended that, whether the debt preferred was a debt of the firm or the individual debt of the member, it was an act of bankruptcy by the firm.
A partnership, under the bankrupt act of 1898, is a distinct entity-- a 'person.' Act July 1, 1898, c. 541, Sec. 1, cl. 19, 30 Stat. 545 (U.S. Comp. St. 1901, p. 3421). As an entity it may be adjudged to be a bankrupt, irrespective of any adjudication against the individual members. In re Meyer, 98 F. 976, 39 C.C.A. 368; In re Mercur, 122 F. 384, 58 C.C.A. 472; Loveland on Bankruptcy (3d Ed.) Secs. 96, 97, 98. When there is no adjudication against the firm, the firm assets cannot be administered by the bankrupt court, if there be one member not adjudicated, unless he consent. In such cases the unadjudicated partner has the right to wind up the firm, paying over only the share of the bankrupt partner to his trustee. Act 1898, Sec. 5. So distinct are the estates of the members of the firm from that of the firm that, when all the members of the firm are adjudged bankrupt individually and the firm is not so adjudged, the trustee of the individual members was adjudged not to be entitled to administer firm assets which were in the hands of a trustee under an assignment made by the firm. Amsinck v. Bean, 22 Wall. 395, 22 L.Ed. 801; In re Mercur, 122 F. 384, 58 C.C.A. 472.
But it is not an act of bankruptcy for which a firm may be adjudged a bankrupt that one of its members, out of his individual estate, prefers one of his own or one of the firm's creditors. In bankruptcy, the assets of a bankrupt partnership must be first applied to the payment of partnership debts, and the individual assets to the payment of the individual debts. The joint creditors are only entitled to share in the surplus of the individual assets, and the individual creditors only in the surplus of joint or firm assets. Bankr. Act 1898, Sec. 5. The application by one partner of his individual property to the payment of one firm creditor would be an individual act, and not the joint act of the firm, and, therefore, not an act for which the firm could be adjudged bankrupt. In re Redmond, Fed. Cas. No. 11,632; Hartman v. John Peters & Co. (D.C.) 146 F. 82. Although the intent be to prefer a firm creditor, it is not enough to sustain a proceeding against the firm. Loveland on Bankruptcy, Sec. 49. The general averment that the firm of J. H. Fisher & Co. have, within four months, 'paid out large sums of money in the settlement of the debts of the firm and thereby making preferences among creditors,' etc., is a vague dragnet, specifying no act of preference which under any rule of pleading would justify an adjudication. Loveland on Bankruptcy (3d Ed.) Sec. 69. The dismissal of the petition, so far as an adjudication against the firm is sought, was not error.
There remains the question as to whether John H. Fisher can be individually adjudicated a bankrupt upon the averments of this petition. If we construe the averments to be that Fisher has applied his individual property to the payment of a joint debt, and we think we must, intending to prefer that debt over...
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