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: 8
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250 FEDERAL REPORTER
the partnership creditor to share in the individual property of the
partners on an equality with the individual creditors of the partners.
It is contended by appellants that they were creditors both of the
partnership and of the individual members. The facts from which
their claims arise are not in dispute. The appellants were induced to
purchase drafts of the bankrupt firm, supposed to be secured by bills
of lading representing shipments of staves, through false represen-
tations made to them or contained in the forged or fraudulent bills of
lading that were attached to the drafts. The drafts were not paid.
The claim proven against the partnership was upon the drafts as
partnership obligations in contract. The claims attempted to be proven
against the individual estates of the partners were for damages for
the false representation alleged to have been made by the partners. The
partners were cognizant of the frauds, though the particular drafts
were not signed or indorsed or negotiated by either partner, and nei-
ther partner profited from the transaction, except through his interest
in the firm. The transaction was one in the ordinary course of the
firm business, except that it was a fraudulent one, and the proceeds
of the drafts went to the credit of the firm, and were used in the con-
duct of its business. Eliminating its fraudulent character, the trans-
action was altogether a partnership one, and would have supported
proof of claim only against the partnership estate.
It is contended that the commission of the fraud was the act of the
partners, even though they did not, in person, sign and negotiate the
drafts, because the fraud of their agent was imputable to them, and
because they knew of the fraudulent system under which the firm was
doing business. If the act of the partners, then the contention is that
it will support a claim against the partners individually, which can be
proven in bankruptcy against their individual estates, either as a tort
or upon the theory of waiver of its tortious character. We do not think
that the policy of the bankrupt law to subordinate firm creditors to
the creditors of the partners individually in sharing the individual as-
sets of the partners would permit us to entertain such a fiction. We
think the determination as to whether the claim is partnership, or in-
dividual, or both, should depend upon the real character of the trans-
action, and, if that be unmistakably an exclusively partnership one,
neither fiction nor implication should be resorted to to give it a differ-
ent character. If the partners had by separate contract of guaranty
obligated themselves to the claimants, such separate contract would
have afforded a basis for a claim against their individual estates. So,
if it had been shown that their individual estates had been enriched
by the transaction complained of, or that they had been guilty of a
separate and personal delinquency from that of the partnership, an
individual obligation to make restitution to the injured claimant might
have been implied.
In the absence of a separate, individual obligation, or a showing of
benefit moving to the partner individually from the transaction, we
can see no reason for sustaining a double proof of claim in favor of
the implied obligation, when it would not be sustained where the ob-
ligation is an express one. Each partner and his property is individ-
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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/m1/23/: accessed April 27, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.