classes of creditors, when every creditor has assented, or when the accounts have been so kept that it would be impossible or very difficult and expensive to discriminate between the joint and separate debts and assets.1 § 121. What is Property of the Firm. As to what property will be considered to belong to the firm, or to the several partners, the reader is referred to works on Partnership. In bankruptcy the courts treat this question according to the fact, so that if a creditor takes security upon property of the firm, having reason to suppose it belonged to one partner, it will be held a firm security notwithstanding the ignorance of the creditor that it was so; nor does it make any difference that one partner owns the whole capital, his separate creditors must give way to those of the firm.3 In England, however, if one is held out as a partner to the world generally, the stock in trade will be firm assets in bankruptcy.* This seems to depend on the doctrine of reputed ownership, which does not obtain in this country.5 In the absence of fraud, the rule will not be varied by evidence that money borrowed on the credit of one partner has, in fact, been applied for the benefit of the firm, or vice versa. The right of participation in joint or separate assets will be 1 Ex parte Fuller, 1 Mont. & A. 222; Harris v. Farwell, 13 Beav. 403; Ex parte Part, 2 Dea. & Ch. 1; Ex parte Sheppard, 3 Dea. & Ch. 190; Lindley, Partnership, 6th ed., p. 712; Re Kriegel, 10 Morrell, 99. [In the United States a creditor who holds a joint and several obligation may prove against the firm and the separate estate also. Re Farnum, 6 Law Rep. 21, Fed. Cas. No. 4674; Mead v. Nat. Bank, 6 Blatch. 180, Fed. Cas. No. 9366; Re Bradley, 2 Biss. 515, Fed. Cas. No. 1772; Re Tesson, 9 N. B. R. 378, Fed. Cas. No. 13,844; Ex parte Nason, 70 Maine, 363; Roger Williams Bank v. Hall, 160 Mass. 171; Carter's Ass't, 98 Ia. 261. This rule did not obtain in England until established by statute. Ex parte Bevan, 10 Ves. 107; Ex parte Rowlandson, 3 P. Wms. 405; Ex parte Hill, 2 Dea. 249; Goldsmid v. Cazenove, 7 H. of L. Cases, 785; Ex parte Chevalier, 1 Mont. & A. 345. See 32 & 33 Vict., c. 71, § 37, and Simpson v. Henning, L. R. 10 Q. B. 406; Banco De Portugal v. Waddell, 42 L. T. 698, 5 App. Cas. 161.] 2 Ex parte Connell, 3 Dea. 201; Re Collie, 3 Ch. D. 481. 8 Ex parte Hunter, 2 Rose, 382. 4 Re Rowland, L. R. 1 Ch. 421; Re Hayman, 8 Ch. D. 11; Ex parte Arbouin, De G. 359. 5 See infra, § 362. 6 Ex parte Bolitho, Buck, 100; Ex parte Peele, 6 Ves. 602; Ex parte Hartop, 12 Ves. 349; Ex parte Hunter, 1 Atk. 223; Ex parte Emly, 1 Rose, 61. decided in the same way as when an action at law is brought against a solvent person or his firm. If a creditor takes a firm obligation for the debt of one partner, he is bound to show the authority of the partner to give it, and may then prove against the joint assets, unless it was given as security, in which case he may prove against both estates, provided always that the new obligation was given in good faith, and not for the purpose of obtaining a larger dividend in an apprehended bankruptcy.1 § 122. Joint Creditor taking Separate Promise. If one who has the right to a joint credit has knowingly accepted a separate promise in payment, or if he has taken judgment against, or a bond executed by, a part only of the members of the firm, the joint debt is merged in the new and higher obligation,2 unless that is expressly taken as security only; and in case of bills and notes the presumption usually is that they are taken as security. The rule of merger by judgment, however, does not obtain if the omitted partner, though alive, was beyond the reach of process, or died before action brought.* And it will be understood that if the original debt is joint and several, a separate judgment is no merger.5 So one who accepts a joint for a separate obligation.2 In several of the States it is provided by statute that a judgment against some of the partners shall not be a merger. The law in bankruptcy will be modified accordingly in cases to which these statutes apply. 6 § 123. Election. If the promise is ambiguous, as if a note or contract, whether under seal or not, be signed by the part 1 Ex parte Thorpe, 3 Mont. & A. 716; Ex parte Austen, 1 M. D. & De G. 247; Ex parte Agace, 2 Cox, 312; Ex parte Bonbonus, 8 Ves. 540; Ex parte Goulding, 2 Gl. & J. 118. 2 Ex parte Flintoff, 3 M. D. & De G. 726; Ex parte Higgins, 3 De G. & J. 33; Tremlett v. Hooper, 10 Gray, 254; Re Savage, 16 N. B. R. 368, Fed. Cas. No. 12,381; Re Herrick, 13 N. B. R. 312, Fed. Cas. No. 6420. • Ex parte Seddon, 2 Cox, 49; Ex parte Lobb, 7 Ves. 592; Ex parte Hay, 15 Ves. 4; Ex parte Kedie, 2 Dea. & Ch. 321; Keay v. Fenwick, 1 C. P. D. 745; Bottomley v. Nuttall, 5 C. B. N. 8. 122. 4 Dennett v. Chick, 2 Greenl. 191; Rand v. Nutter, 56 Maine, 339; Bean v. Birdsall, 29 Barb. 549; Ex parte Waterfall, 4 De G. & S. 199. 5 Drake v. Mitchell, 3 East, 251; Ex parte Bate, 3 Dea. 358. • See Bates on Partnership, § 537. ners, but not in the firm name, or if a latent ambiguity is proved by the fact that the partners were in the habit of using the given form in their partnership dealings, the true nature of the transaction may be shown.1 So if the fact of partnership, or of there being a dormant partner, is not known to the creditor, and the debt is in fact joint, he may elect to prove against the separate estate or estates, according to the form of the obligation, or against the joint estate as an undisclosed principal.2 But if one knowing of the partnership discounts the paper of one member, or lends him money, he cannot prove against joint assets, though the money was borrowed for their use. If the original obligation is joint and several, a separate judgment is, of course, no merger, but a joint judgment will be. 4 § 124. Election at the Time of Proof. Although the rule now under consideration pertains rather to the distribution of the assets than the proof of debts, it is highly convenient to decide at the time the proof is offered what its effect shall be, and accordingly the practice is for the creditor to signify in his proof against which estate or estates he claims the right of proof; and the decision is probably subject to appeal, as in case of other proofs. This point is important only when the mode of applying to the higher court is different, when the question is one of proof from what it is upon points of marshalling. 1 Agawam Bank v. Morris, 4 Cush. 99; Ex parte Stone, L. R. 8 Ch. 914; Ex parte Nason, 70 Maine, 363; Re Thomas, 17 N. B. R. 54, Fed. Cas. No. 13,886; Berkshire Woolen Co. v. Juillard, Receiver, 75 N. Y. 535. See Ex parte Weston, 12 Met. 1. 2 Ex parte Adam, 2 Rose, 36; Ex parte La Forest, Cooke, 7th ed., 261; Ex parte Benson, Cooke, 7th ed., 263; Ex parte Law, 3 Dea. 541; Re Warren, 2 Ware, 322, Fed. Cas. No. 17,191; Ex parte First Nat. Bank, 70 Maine, 369; Ex parte Norfolk, 19 Ves. 455, where Lord Eldon says the rule had been es tablished for thirty years; Ex parte Hamper, 17 Ves. 403; Ex parte Chuck, 8 Bing. 469. 3 Emly v. Lye, 15 East, 7, case referred by the Lord Chancellor ; Ex parte Emly, 1 Rose, 61; Ex parte Wheatley, Cooke, 7th ed., 509. 4 Re Herrick, 13 N. B. R. 312, Fed. Cas. No. 6420; Dennett v. Chick, 2 Greenl. 191, 11 Am. Dec. 59; Freeman, Judgments, 4th ed., § 235. 5 Purple v. Cooke, 4 Gray, 120; Harmon v. Clark, 13 Gray, 114. Conant v. Perkins, 107 Mass. 79. § 125. A Joint Creditor may prove against Separate Estates when there are no Joint Assets and no Solvent Partner. - In England an exception to the general rule was introduced by Lord Rosslyn, and has been adhered to, by which the joint creditors may prove against the separate estates in competition with separate creditors, if there is no joint property and no solvent partner.1 This exception is carried to such a refinement that if the joint assets are insignificant, not enough even to pay the costs, or, as it has been held, if the separate creditors create a small joint fund by buying worthless separate assets, the general rule holds.2 3 A solvent partner means one within the jurisdiction; but if such partner is technically solvent, that is, has made no general assignment, or is subject to no adjudication, he is to be considered solvent.4 The reason for the rule concerning a solvent partner is that if he pays the debts, his proof will be limited to the actual balance due him, whereas creditors prove for the full amount of their debts. In Massachusetts the rule of marshalling, in administering the estates of living insolvents, is provided by the statute itself, and the courts hold that this positive direction is not affected by the fact of the absence of joint assets, and has no exception.5 Most courts in this country adhere to the English exception, on the ground that the doctrine which had been originally established by the English courts should, when adopted here by statute, be taken with its exceptions; and some decisions go 1 Ex parte Janson, Buck, 227, 3 Madd. 229; Ex parte Morris, Mont. 218; Cowell v. Sikes, 2 Russ. 191; Ex parte Sadler, 15 Ves. 52; Re Budgett (1894), 2 Ch. 557. 2 Ex parte Kennedy, 2 De G. M. & G. 228; Re Marwick, 2 Ware, 233, Fed. Cas. No. 9181; Ex parte Bradshaw, 1 Gl. & J. 99. 6 Ex parte Janson, Buck, 227, 3 Madd. 229. 5 Howe v. Lawrence, 9 Cush. 553; Robb v. Mudge, 14 Gray, 534; Wild v. Dean, 3 Allen, 579; Somerset Potters Works v. Minot, 10 Cush. 592. 6 Re Downing, 1 Dillon, 33, Fed. Cas. No. 4044; Emanuel v. Bird, 19 Ala. 596; Re Knight, 8 N. B. R. 436, 8 Ex parte Kensington, 14 Ves. 447; Fed. Cas. No. 7880; Rogers v. Meranda, Ex parte Morris, Mont. 218. 7 Ohio St. 179; Brock v. Bateman, 25 beyond the precedents, holding that there must be joint assets after paying costs.1 Other very respectable authorities agree with those of Massachusetts. One learned judge, giving his opinion in the Supreme Court, called this and another English exception "eccentric variations" from the general rule.3 § 126. Joint Contractors. — In England it is held that all joint debts of partners, though without relation to the business, as where they are jointly and severally sureties for a third person, may be proved against the joint assets, and that the general rule of marshalling applies to all joint contractors, though they should not be partners. But in the United States, wherever it is matter of statute, the rule is, in terms, confined to partners, and, by decision, to promises or undertakings which bind the firm. If joint contractors or obligors, not partners, are bankrupt, they must be so separately, and the creditor's claim is severed, and he can prove against each estate, or he cannot prove at all in competition with the bankrupt's other creditors. The former alternative is adopted.5 § 127. Bankruptcy of One Partner. If one partner is adjudicated bankrupt, and his estate is assigned, the firm is thereby Ohio St. 609; Re Collier, 12 N. B. R. 266, Fed. Cas. No. 3002; Re Pease, 13 N. B. R. 168, Fed. Cas. No. 10,881; Re Litchfield, 5 Fed. Rep. 47; Harris v. Peabody, 73 Maine, 262; Re Jewett, 1 N. B. R. 491, Fed. Cas. No. 7304; Re Rice, 9 N. B. R. 373, Fed. Cas. No. 11,750; Re Goedde, 6 N. B. R. 295, Fed. Cas. No. 5500. 1 Re McEwen, 12 N. B. R. 11, Fed. Cas. No. 8783; Re Smith, 13 N. B. R. 500, Fed. Cas. No. 12,987; Harris v. Peabody, 73 Maine, 262; Re Blumer, 12 Fed. Rep. 489. 2 Quare by Ware, J., in Re Marwick, 2 Ware, 233, Fed. Cas. No. 9181; Weyer v. Thornburgh, 15 Ind. 124; Eaton v. Able, 91 Ind. 107; Warren v. Farmer, 100 Ind. 593; Re Walker, 6 Ont. App. 169; Re Estes, 3 Fed. Rep. 134; Re Byrne, 1 N. B. R. 464, Fed. 8 Murrill v. Neill, 8 How. 414. 4 Hoare v. Oriental Bank, 2 App. Cas. 589; Ex parte Field, 3 M. D. & De G. 95, overruling Ex parte Buckingham, 1 M. D. & De G. 235, and Ex parte Crosfield, 1 Dea. 405; and see Ex parte Bauerman, 3 Dea. 476, 480, per Sir G. Rose. 5 See Ex parte Weston, 12 Met. 1; Harmon v. Clark, 13 Gray, 114, 122; Forsyth v. Woods, 11 Wall. 484, 486, per Strong, J.; Re Nims, 16 Blatch. 439, Fed. Cas. No. 10,269; Re Roddin, 6 Biss. 377, Fed. Cas. No. 11,989; Buffum v. Seaver, 16 N. H. 160; Mack v. Woodruff, 87 Ill. 570. |