pany would be within the act. There would seem to be no power under this section to proceed in bankruptcy against companies organized to operate telegraphs or telephones. For a learned discussion of this subject see Corporations Under the Bankruptcy Act of 1898, by H. Campbell Black, Esq. in 8 Yale Law Journal, 105. A corporation is subject to bankruptcy proceedings, although it has been dissolved by a state court.1 A person may be adjudged a bankrupt on default or on an impartial trial. This does not mean a trial by jury, for the judge is given the right to make the adjudication where the bankrupt does not claim a trial by jury (§ 18 d). § 468. Act of 1898. 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 1 Thornhill v. Bank of Louisiana, 1 Woods 1, Fed. Cas. No. 13,992; Re Independent Ins. Co., 2 Lowell, 97, Fed. Cas. No. 7018; Holmes, 103, Fed. Cas. No. 7017; Re Merchants' Ins. Co., 3 Biss. 162, Fed. Cas. No. 9441. 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; but 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. This section is very similar to the corresponding section of the Act of 18671 in its general provisions. There is one important addition, however, which seems to recognize the commercial view of a partnership as a separate entity.2 Paragraph g provides for the proof by an individual estate against the partnership estate and vice versa. A provision like this but not 1 § 36, 14 Stats. 534, R. S. § 5121. See Chemical Bank v. Meyer, 92 Fed. restricted to the case where both partners and firm were bankrupt was contained in a bankruptcy bill drawn by John Lowell which was introduced in Congress in 1884. This will modify the old law in an important respect. Under the Act of 1867 one partner might petition to have a firm declared bankrupt.2 Under the present law § 59 b requires that three or more creditors should ordinarily join in a petition unless there are less than twelve creditors. The terms of this section are broad enough to include partnerships, but Rule VIII. seems to contemplate the case of one partner bringing a petition against the partnership. The rule provides that a partner who objects may make any defences which a debtor could make in involuntary proceedings, and if the adjudication is made he must file a schedule and inventory like any other debtor.3 A partnership may be adjudged bankrupt at any time before its affairs are settled. The law was to this effect also under the Act of 1867,5 but it was different under the Act of 1841.6 When one partner files a petition for the firm and some partners do not join, notice should be given them, as the assets of the firm can not be administered without bringing all the partners in. And a firm cannot be declared bankrupt while there is a solvent partner.9 The rule laid down in paragraph b was the law under the act from which this provision is drawn.10 If some of the partners are bankrupt but not the firm the trustee will be appointed by joint and separate creditors. The proceedings under this clause refer only to cases where the firm is bankrupt. Under the Act of 1867 firm creditors could vote for the assignee of a bankrupt partner,11 and such is probably the rule now. 1 See Lowell Bill, Bankruptcy of Partners, by Alfred Mack, Esq., 19 Am. Law Rev. 32. 2 § 36, 14 Stats. 534, R. S. § 5121. 3 General Orders in Bankruptcy, Rule VIII. 4 Re Levy, 1 N. B. N. 287. 5 Supra, § 22. 6 Re Hartz, Fed. Cas No. 6174. 7 Re Lewis, Ben. 96, Fed. Cas. No. 8311. 8 Shumate v. Hawthorne, 3 N. B. R. 227. 9 Hanson v. Paige, 3 Gray, 239; Re Bennett, 2 Lowell, 400, Fed. Cas. No. 1314. 10 Re Phelps, 1 N. B. R. 525, Fed. Cas. No. 11,071. 11 Wilkins v. Davis, 15 N. B. R. 60, Fed. Cas. No. 17,664. The proceedings may be begun in any court of bankruptcy which has jurisdiction over a partner. Under the Act of 1867 if petitions were filed in different districts the first court in which a petition was filed retained control. Section 32 of the present act provides that in such a case the proceedings shall be transferred to the court which can deal with them for the greatest convenience of parties in interest. Rule VI. seems to conflict with this section. It has different provisions for the case where petitions are filed by creditors than in the case where the partners file them. As to petitions filed by creditors of a partnership, Rule VI. provides that the one first filed shall be first heard and the others may be stayed meanwhile. The court which first makes adjudication is to keep control. The provisions of § 32 of the act are departed from in this rule. The only way of reconciling them is to hold that § 32 does not apply to petitions against a partnership but merely against the different members. In view of the comprehensive meaning of "person" used in this section such a construction seems strained. In the case of a conflict between the rule and the section the former must give way, because it is valid only so far as it carries the "act into force and effect."2 Rule VI. also provides that the petition first filed may be amended by alleging an earlier act of bankruptcy if that earlier act had been alleged in any of the other petitions. As to petitions by members of a partnership, Rule VI. provides that the first petition shall be acted on unless the court is satisfied that it would be for the greatest convenience of parties in interest to have another court proceed with it. The rule of paragraph d was contained in the Act of 1867 and is made necessary by the mode of distribution prescribed by paragraph f of this section. The general rule as contained in paragraph ƒ has always prevailed in the United States. It was adopted from the law of England by statute or decision.3 In England an exception 1 Supra, § 119. 3 Supra, § 120. was made in favor of joint creditors where there were no joint assets and no solvent partner. In such a case they were allowed to prove against the separate estates, but this rule was regarded with disfavor and was departed from where there were any joint assets at all though insignificant in amount. The courts were glad to find a pretext for disregarding the rule and did so in several cases where the separate creditors were clever enough to create a joint fund by buying up worthless joint assets for a small sum.2 By the operation of this rule separate creditors who had given credit to the separate partners were placed in no better position than joint creditors who had looked to the firm for the payment of their debts. This was clearly a departure from the rule that joint assets should be used to pay joint debts and separate assets to pay separate debts. The decisions in the United States were not uniform. The courts of Massachusetts did not recognize the exception and other authorities followed them, but many courts followed the English rule. Judge Lowell has held in an opinion of great learning and ability that this exception does not prevail under the Act of 1898.4 Under the decisions in England and the United States a partner can not prove against the bankrupt firm or the separate estate of another partner except for a debt totally disconnected with firm affairs 5 unless all the joint debts are paid, because, as it is said, he would be proving against his own creditors. An exception is made if a partner has fraudulently abstracted firm property. In that case the other partners are allowed to prove against his estate. This rule of law so far as it relates to cases where the firm and its partners are bankrupt is abrogated by paragraph g, which allows the proof of a claim of a partner's estate against the partnership estate, and puts the partners on the same footing as creditors with regard to proof against the firm when both are bankrupt. 2 Ib. 1 Supra, § 125. 3 Ib. 4 Re Rouss, 94 Fed. Rep. 84. Supra, § 134. 7 Supra, § 134. |