The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918. Page: 7
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BCHALL V. CAMORS
be proven doubly-against the estate of the partner and that of the
partnership. We find it unnecessary to consider the first much litigated
question, because of the conclusion we have reached upon the second.
The Bankruptcy Act of 1898, even to a greater extent than its prede-
cessors, recognizes the separation between a partnership and its mem-
bers. It permits an adjudication of the partnership as an entity, as
distinguished from the individuals composing it. It provides that the
partnership creditors shall appoint the trustee; that the trustee shall
keep separate accounts of partnership property and that of the mem-
bers of the firm; that there shall be a division in the payment of ex-
penses of administration beween the partnership and individual es-
tates, as directed by the court; that the net proceeds of partnership
property shall be first appropriated to pay partnership debts, and the
net proceeds of the estate of an individual partner be first appropri-
ated to pay his individual debts, each class to have resort only to the
surplus of the other, if any exists; that the court may permit the
proof of claim of the partnership estate against individual estates and
vice versa, and may marshal the assets of both classes of estates to
secure an equitable distribution of property of the several estates.
The scheme of administration for partnerships by section 5 of the
present act shows the purpose to administer partnership estates ac-
cording to the equitable principle of devoting partnership property
primarily to the payment of partnership debts, and individual prop-
erty primarily to the payment of the debts of the individual partner.
The machinery provided by section 5 is adapted for administration on
this line. Recent decisions of the Supreme Court have emphasized
the purpose of the statute in this respect. In the case of Miller v.
New Orleans Fertilizer Co., 211 U. S. 496-506, 29 Sup. Ct. 176, 53
L. Ed. 300, the court held that the distribution provided by section 5,
preferring individual creditors of a partnership in the distribution
of his individual property, would overrule a contrary rule that obtain-
ed in the state of the domicile of the bankrupt. In the case of Farm-
ers' Bank v. Ridge Avenue Bank, 240 U. S. 498, 36 Sup. Ct. 461, 60 L.
Ed. 767, L. R. A. 1917A, 135, the court held that the method of dis-
tribution provided in section 5 admitted of no exception, even though
the partnership, and all of its members, were insolvent, and the only
fund for distribution was produced by the assets of one of the mem-
bers, departing m this respect from the contrary rule in England.
In the administration of the present bankrupt law, therefore, the
principle of the devotion of partnership assets to satisfy partnership
debts, before the creditors of the individual members can resort to
them for payment, and the reverse of this rule, should not lightly be
departed from. If one, who is a creditor of the joint or partnership
estate, is permitted to prove his claim against both the partnership
estate and the individual estate of one or more of the partners, the
principle would be infringed, if the partner or partners had individual
creditors. If, in this case, the appellants were partnership creditors,
their claim against the individual estates of the partners was properly
disallowed. The effect of its allowance would have been to enable
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The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918., legislative document, 1918; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38821/m1/22/: accessed April 29, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.