Trading Corporations.

[Ch. III. under the present Bankruptcy Act that the mining of gold and silver is not manufacturing. (In re Elk Park M. & M. Co. 4 Am. B. R. 131; 101 Fed. 422.) It has been held that one is a manufacturer who works up lumber into timber although he purchases the land as well as the standing timber. (In re Cowles, Fed. Cas. 3,297; 1 N. B. R. 280; Hankey v. Jones, Cowp. 745; in re Chandler, 4 N. B. R. 213; Fed. Cas. 2,591; I Lowell, 478; Hall v. Cooley, 2 N. Y. Leg. Obs. 282.) It was also held under the last act that one engaged in printing and publishing a newspaper is a manufacturer (in re Kenyon, 6 N. B. R. 238; s. c. I Utah Ter. 47); but corporations engaged in printing and publishing, are by the present statute expressly made liable to be adjudged involuntary bankrupts.

For a discussion as to what constitutes manufacturing see People ex rel. New England Dressed Meat, etc. Co. v. Roberts (155 N. Y. 408), in which it was held that a company engaged in slaughtering and refrigerating mutton was not engaged in manufacturing.

Trading Corporations.-Most cases as to who are traders have arisen in the English courts. Until the act of 24 and 25 Vict. ch. 134, no person but a trader could be made bankrupt. The question occasionally arose under the last American Bankruptcy Act, and also under the act of 1841. An elaborate note in Parsons on Contracts, 7th ed. volume 3, chapter on Insolvency and Bankruptcy collates all the English cases. The question is not so likely to be a puzzling one when it arises in the case of a corporation as in the case of an individual, since the latter may pursue many occupations, while corporations are by their charter given a more limited range of powers; but it is thought the following cases may be of service. To constitute trading, the transaction must not be isolated; there must be an intention to carry on the particular pursuit as a livelihood or as a regular business; one single act of trading is not sufficient; but nevertheless the intention to trade, rather than the quantity or frequency, is the test. (Heanny v. Birch, 3 Camp. 233; Ex p. Moule, 14 Ves. 602; Er þ. Wilkes,

2 Mont. & Ayr. 667.) But a single act may be enough if done with the intention of making a business of trading. (Gimmingham v. Laing, I Rose, 472; Ex p. Lavender, 4 Deac. & C. H. 487; 2 Mont. & Ayr. 11; Newland v. Bell, Holt, 221; Gale v. Halfknight, 3 Starke, 56; Patman v. Vaughan, 17 R. 572.)

In the case of the New York and Westchester Water Co. (District Court, S. D. N. Y., reported in 3 Am. B. R. 508; 98 Fed. 711) it was held that a company incorporated to buy and sell water for power, manufacturing and hydraulic purposes which had confined itself entirely to obtaining and furnishing water for certain customers, cities and commercial boroughs, was not engaged principally in either trading or mercantile pursuits, under section 4b, on the ground that the furnishing of water was not the direct sale of any specific amount of water, but was in the nature of a use of the company's transportation service in return for fixed sums in the form of rentals. This case has been affirmed, upon opinion of the District Court, by the Circuit Court of Appeals of the Second Circuit, on May 5th, 1900. The opinion of the District Court contains a very valuable discussion of the authorities.

The following extract from the opinion of Judge Brown is instructive:

"I am of opinion that this water company is not within the provisions of the Bankrupt Act, because not engaged principally in either trading or mercantile pursuits,' in the sense in which I think those words are used. The question depends entirely upon the proper construction to be given to those words, since there are plainly no other words in the present act that could include an incorporated water company like this.

The Act of 1898 is much more limited in its application to corporations than the Act of 1867. By the latter act it was declared (sec. 5122, Rev. St.) to apply to all moneyed, business or commercial corporations and joint stock companies.' The present act is restricted to corporations engaged principally in manufacturing, trading, printing, publishing, or mercantile pursuits.'

The intention of Congress greatly to restrict the application of the present act appears manifest, not only from comparison of the phraseology of the two acts, but also from the report of the Congressional conference committee upon this point, showing that at least railroad and transportation corporations and banks were intended to be omitted and left to be dealt with under the State laws. 31 Con. Rec. p. 6247, June 28, 1898. In the recent case of In re Cameron

Trading Corporations.

[Ch. III. Town Mut. Fire, Lightning & Windstorm Ins. Co. (D. C.), 96 Fed. 756, 2 Am. B. R. 372, it was accordingly held, that the present act does not apply to a mutual insurance company, and the petition in that case was dismissed. On the point here considered, Phillips, J., observes:

'Can it be said that a company "organized for the sole purpose of mutually insuring the property of the members, and for the purpose of paying any loss incurred by any member thereof by assessment," is principally engaged in a mercantile pursuit? When the Legislature changed the statute from "moneyed, business or commercial corporations" to the language "principally engaged in mercantile pursuits," it is to be presumed it was done for a purpose. The word "mercantile," in its ordinary acceptation, pertains to the business of merchants, and has "to do with trade, or the buying and selling of commodities." A merchant is one who traffics, or who buys and sells goods or commodities. . . . The term "mercantile pursuit" necessarily carries with it the idea of traffic, the buying of something from another or the selling of something to another, and is allied to trade. This concern has nothing in its business of the character of mercantile pursuit.' 96 Fed. 757, 758. 2 Am. B. R. 374, 375.

The case of a water company like this, obtaining by purchase about twofifths of the supply which it furnishes to its customers, is not so clearly exIcluded as a mutual insurance company. But in each case as it arises the limitations imposed by the act must be carefully observed. No such corporation can be subjected to the operation of the Bankrupt Law, nor can the court acquire jurisdiction over it, unless it is found to be 'engaged principally in trading or mercantile pursuits.' These words must be interpreted in the sense in which they are commonly used and received, and not in any strained or unnatural sense for the purpose of including or of excluding particular corporations.

In Bouv. Law Dict. a trader is defined as one who makes it his business to buy merchandise or goods and chattels and to sell the same for the purpose of making a profit.' Black, Law Dict. says: 'One whose business is to buy

and sell merchandise or any class of goods, deriving a profit from his dealings; and the weight of authority seems to be that the proper description of the business of a trader includes both buying and selling, either goods or merchandise, or other goods ordinarily the subject of traffic. Per Lord Ellenborough in Sutton 7. Weeley, 7 East. 442; Thompson, C. J., in Wakeman v. Hoyt, 28 Fed. Cas. 1,351; Lowell, J., In re Chandler, 4 N. B. R. 213, 5 Fed. Cas. 447; In re Smith, 2 Low. 69, 22 Fed. Cas. 395; Love v. Love. 15 Fed. Cas. 999.

The words mercantile pursuits' may have a little broader signification than trading. Mercantile' is defined by the Century Dictionary as having to do with trade or commerce; of or pertaining to merchants, or the traffic carried on by merchants; trading; commercial.' It signifies for the most part the same thing as the word 'trading' and by mercantile pursuits' is meant the buying and selling of goods or merchandise or dealing in the purchase and

sale of commodities, and that too not occasionally or incidentally, but habitually as a business. Norris v. Com. 27 Pa. St. 494; Com. v. Natural Gas Co. 32 Pittsb. Leg. J. 310.

Selling merely the natural products of one's own land, it has been held, does not constitute trading, or a mercantile pursuit, even though some yearly purchases may be made by the seller in order to keep up his regular supply. In re Woods, 7 N. B. R. 128, Fed. Cas. No. 17,990; Port v. Turton, 2 Wils. 169; In re Cleland, 2 Ch. App. 466; Ex parte Gallimore, 2 Rose, 424. These terms are restricted also to dealings in merchandise, goods or chattels, the ordinary subjects of commerce; so that a railroad contractor, or a speculator in stocks, whether on his own account, or as broker, is not deemed a trader or merchant. In re Smith, 2 Low. 69, 22 Fed. Cas. 395; In re Marston, 5 Ben, 313, 16 Fed. Cas. 857; In re Woodward, 8 Ben. 563, 30 Fed. Cas. 542; In re Moss, 19 N. B. R. 132, 17 Fed. Cas. 901, per Choate, J. It has also been held that incidental purchases or sales by a person not otherwise a trader, will not make him such. Lord Eldon, Ex parte Gallimore, 2 Rose, 424; Patten v. Browne, 7 Taunt. 409; In re Duff (D. C.), 4 Fed. 519, per Choate, J.; In re Kimball (C. C.), 7 Fed. 461, per Lowell, J.

No doubt the powers of a corporation are to be determined by its charter and by the statutes applicable to it. The amendment of the charter of this corporation authorized it to buy, sell, use and deal in water for power, manufacturing and hydraulic purposes.' As above stated, however, the evidence is that it did not furnish water for these purposes; and under the Bankrupt Act the question is, not how extensive the company's powers may be, but in what pursuits the corporation is in fact principally engaged, and whether these pursuits are principally trading or mercantile."

In the case of In re San Gabriel Sanitorium Co. (2 Am. B. R. 408;95 Fed. 271) it was decided that a sanitorium which charged fees and did business as a private hospital was a trading corporation. This decision does not commend itself to us as authoritative.

As to other corporations becoming bankrupts under the provisions of section 3a (5), see that section, ante.

SEC. 5. Partners.—a A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt.

b The creditors of the partnership shall appoint the trustee; in other respects so far as possible the estate shall be administered as herein provided for other estates.

c The court of bankruptcy which has jurisdiction of one of the

partners may have jurisdiction of all the partners and of the administration of the partnership and individual property.

d The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners. e The expenses shall be paid from the partnership property and the individual property in such proportions as the court shall determine.

f The net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and the net proceeds of the individual estate of each partner to the payment of his individual debts. Should any surplus remain of the property of any partner after paying his individual debts, such surplus shall be added to the partnership assets and be applied to the payment of the partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual partners in the proportion of their respective interests in the partnership. g The court may permit the proof of the claim of the partnership estate against the individual estates, and vice versa, and may marshal the assets of the partnership estate and individual estates so as to prevent preferences and secure the equitable distribution. of the property of the several estates.

h In the event of one or more but not all of the members of a partnership being adjudged bankrupt, the partnership property shall not be administered in bankruptcy, unless by consent of the partner or partners not adjudged bankrupt; Lut such partner or partners not adjudged bankrupt shall settle the partnership business as expeditiously as its nature will permit, and account for the interest of the partner or partners adjudged bankrupt.

Analogous Provisions of Former Acts.

R. S. § 5121; act of 1867, § 36; act of 1841, § 14.

Definitions. By section 1 (19), the word “persons" is made to include partnerships; by (6) all "limited or other partnership associations organized under laws making the capital subscribed alone responsible for the debts of the association" are included in the definition of "corporations," so that this section applies to general partnerships only, and only to partnerships which are such as between the parties. It does not extend to partnerships