In re Sauls
In re Sauls
Opinion of the Court
Ono of the creditors assenting to the bankrupt’s discharge is J. IT. McClellan, as surviving partner of the firm of Guy McClellan & Co., the other partner being dead. If this debt be counted the bankrupt is entitled to his discharge because of having secured the assent of a sufficient number and amount of his creditors who have proved their debts. But if this debt, which was also proved by the surviving partner, be rejected in the count, there is a deficiency of assenting creditors, and the discharge must be refused. The objection is made by a non-assenting creditor that a surviving partner cannot assent so as to bind either the administrator of the deceased creditor or the creditors of the firm, for whom it is argued he is a trustee; and therefore the assent of these cestuis que trust must likewise have been procured to entitle the bankrupt to his certificate.
The question has been argued on both sides with exceptional thoroughness, and it is said by counsel that no ease
The learned counsel for the objectors insists that by the death of a partner the scope of the partnership is restricted to winding up the concern, and the powers of the survivor are correspondingly so restricted that he can appropriate nothing to himself, nor do anything which will operate to the injury either of the creditors of the firm or the administrator of the deceased partner’s estate; that he cannot, without consideration, release a debt due the firm, or give away any portion of the partnership effects, and that his duties are confined to realizing all that is possible out of the assets for the payment of the creditors of the firm and distribution to the deceased partner’s representatives.
The application of this argument to the case in hand is that it is the survivor’s duty to keep the debt against this bankrupt alive to be collected out of future acquisitions, and that, by assenting to his discharge, he thereby extinguishes the debt in violation of this duty, and entails a loss upon those interested, which he has no power to do without their consent. No case is cited which discusses the power of a surviving partner in this matter of consenting to a bankrupt’s discharge, and the argument is deduced from principles applied in common-law or equity cases in restraint of a surviving partner’s power over the partnership property and in aid of those interested in its most beneficial appropriation to the purposes for which he holds it. Daniel v. Daniel, 9 B. Mon. 195; Bookout v. Anderson, 2 La. An. 246; Rogers v. Batchelor, 12 Pet. 221; Vance v. Campbell, 8 Humph. 524; Martin v. Kirk,
These and other eases cited, some of them treating of the powers of a, partner in existing firms, and some of his powers after dissolution, all show that a partner cannot waste the assets or act beyond the scope of the partnership business, nor, after dissolution, create new debts, or misapply the firm property. But they seem to me not to settle any principle which militates against the idea, that, after all, it may be within the legitimate scope of a surviving partner’s power to assent to a bankrupt’s discharge. The nearest analogy to it in the ordinary conduct of his affairs is the release of a debt. The case of Bookout v. Anderson, supra, does decide that in Louisiana a surviving partner cannot release a debtor of the firm so as to qualify him to be a witness, but then the law of Louisiana seems to be peculiar as to the powers of a surviving partner, who has no right at all to administer the firm assets until authorized by a court of probate. Coll. Partnership, (4th Ed.) § 129, note 3; Id. § 666. And in Buckley v. Dayton, 14 John. 387, it was held that the release of a witness by one partner alone was sufficient to qualify him. On general principles, a surviving partner is the owner of the partnership assets; he has the legal title, and it is only in a court of equity that he is treated as a trustee. Case v. Abeel, 1 Paige, Ch. 393. He may collect, compromise, or otherwise arrange all the debts of the firm, and his receipts, payments, and doings generally in that behalf are valid, if honest and within the fair scope and purposes of the trust. And if there be negligence, delay, misconduct, or gross mistake, equity will interfere and give proper relief. Pars. Part. (3d Ed.) 440; Id. 442 and notes. So completely is this so that the firm assets pass to his administrator and to his individual assignee in bankruptcy. Brooks v. Brooks, 12 Heisk. 12; Re Stevens, 5 N. B. R. 112.
The powder of a partner in an existing firm to release a debt cannot be doubted, even after dissolution. Coll. Part. §§ 468, 636, 637; Story, Part. §§ 115, 252; Pars. Part. 172, note w; Salmon v. Davis, 4 Binney, 375; Nepier v. McLeod, 9 Wend.
In this last ease, Ex parte Hall, it was the signature of the certificate by one partner after a dissolution. In all the cases cited, and many others examined, while I find no case ruling the point as to a surviving partner, I find none taking a distinction against him in this matter of assenting to a discharge ; and, inasmuch a's his title is enlarged, and he is more exclusively and entirely master of the assets than before dissolution, or after dissolution, otherwise than by death, it would seem that he would have, as surviving partner, in this respect, the same power as that given him in the
In the case of Barrett, 2 N. B. R. 533, where it was ruled that one partner may execute a power of attorney to vote for an assignee, and bind his copartners, the exception in favor of such a power is supported as a necessity in bankruptcy cases, upon the authority of some of the English cases I have cited here. Our own bankrupt law, in the matter of the discharge and this assent of creditors, is modelled on the English statutes under which these decisions were made, and they are quite sufficient as authority. The learned counsel for creditors here insists that the administrator of the deceased partner can, no more than the surviving partner, assent to the discharge, and for the same reasons which he so ably presents. The result would bo that the bankrupt cannot have any assent on this firm’s debt, although it may be proved and counts against him; and we can imagine a case where, all or a large proportion of the creditors of the bankrupt being surviving partners, he could get no discharge at all. It cannot be that he would have to go to all the creditors of Guy McClellan & Co., and all the parties interested in the deceased partner’s estate as cestuis que trust, and procure their assent. Ex parte Dubois, 1 Cox, 310; Ex parte Rigby, 19 Ves. 463. These cases do not apply to executors or partners. This demonstrates the necessity of making this power reside in the surviving partner in bankruptcy cases, whatever his common-law powers may be to release a debt.
Moreover, I am of opinion that the power may be supported as a statutory power under the bankrupt act itself. It is true, this assent operates to extinguish the interest of the administrator of the deceased partner in this debt against the
Let the bankrupt be discharged.
Reference
- Full Case Name
- In re Sauls, Bankrupt
- Status
- Published