Where a partner filed a petition to have himself, the
partnership, and the other partners declared bankrupt, and died
pending review by this Court of orders overruling motions to
dismiss the petition in the last two aspects,
Held:
(1) That § 8 of the Bankruptcy Act, providing that the death of
a bankrupt shall not abate the proceedings, was inapplicable to so
much of the petition as sought the bankruptcy of the firm and the
other partners, they not consenting to such adjudications. P.
264 U. S.
502.
(2) That the question whether the petitioner's right, if any he
had, to maintain the petition as against his partners and the
partnership abated with his death or survived to his proper
representatives in the property involved, so that the bankruptcy
proceeding might be continued in their names, should not be decided
ex parte; but opportunity to appear in this Court and be
heard upon it would be afforded such representatives before
remanding the cause for dismissal as to the partnership and
nonconsenting partners. P.
264 U. S. 503.
Motions to dismiss denied. The opinion below is reported in 292
F. 116.
Page 264 U. S. 500
Certiorari to orders of the circuit court of appeals which
sustained, on petitions to revise, orders of the district court
declining to dismiss a petition in bankruptcy insofar as it sought
an adjudication against the above-named petitioners individually or
against a partnership of which they and Shugert, (respondent here
and petitioner in the district court) were the members.
MR. JUSTICE SANFORD delivered the opinion of the Court.
These three cases -- which were heard together in the circuit
court of appeals, and are included here in one record -- arose out
of a petition in bankruptcy filed by the respondent Shugert in a
federal district court in Pennsylvania. In this petition, he
alleged that he and the present petitioners, Meek, Dale and Breeze,
hereafter called the defendants, were members of a partnership
styled the Centre County Banking Company; that the partnership and
each of the defendants were insolvent, and that he and the
partnership desired to obtain the benefits of the bankruptcy law.
He prayed that the partnership and he and the defendants
individually be adjudged bankrupt. [
Footnote 1] Subpoenas were issued for the defendants. All
appeared and resisted the petition insofar as it sought to have the
partnership and themselves
Page 264 U. S. 501
adjudged bankrupt, [
Footnote
2] and each made a motion to dismiss the petition to that
extent upon the grounds, among others, that it was not authorized
by the Bankruptcy Act and the court had no jurisdiction under it to
adjudge either the partnership or a nonconsenting member bankrupt.
These motions were denied by the district court. On petitions by
the defendants to revise the orders of the district court denying
their motion, the circuit court of appeals, being of opinion that
the petition in bankruptcy was maintainable under § 5 of the
Bankruptcy Act and General Order in Bankruptcy No. 8, [
Footnote 3] affirmed the orders of the
district court. 292 F. 116. These writs of certiorari were then
granted the defendants. 263 U.S. 696.
Shugert thereafter died. And the defendants have moved that the
proceeding in bankruptcy be dismissed as to them, both individually
and as members of the partnership, on the ground that to that
extent it should abate. These motions have been answered by the
attorney who formerly represented Shugert, as now representing his
"interest," and by an attorney representing a "Creditors'
Committee," who insists that, under § 8 of the Bankruptcy Act, the
proceeding in bankruptcy was not abated by Shugert's death, and may
be continued without making Shugert's personal representative a
party. While neither of these attorneys represents any party now
before
Page 264 U. S. 502
the Court, [
Footnote 4] we
treat their answer as the suggestion of
amici curiae.
Section 8 of the Bankruptcy Act provides that:
"The death . . . of a bankrupt shall not abate the proceedings,
but the same shall be conducted and concluded in the same manner,
so far as possible, as though he had not died."
It is clear, however, that, whatever may be the effect of this
provision when construed in the light of § 1a(4) of the act
defining the term "bankrupt," it can have no application except to
that part of the petition in bankruptcy in which Shugert sought to
have himself adjudged a voluntary bankrupt -- a matter not in issue
under the motions to dismiss and not now before us. Even if one
partner may maintain a petition such as this to have the
partnership adjudicated a bankrupt -- a question not now determined
-- yet to the extent that it seeks to have the partnership adjudged
bankrupt as against nonconsenting partners resisting such an
adjudication, it is manifestly an involuntary proceeding.
In re
Murray, 96 F. 600, 602.
And see In re Carleton, 115
F. 246, 249. In
Medsker v. Bonebrake, 108 U. S.
66,
108 U. S. 71,
involving a bankruptcy proceeding brought by one partner against
another under the Act of 1867, this Court said:
"It is not a voluntary bankruptcy if the man is forced into it
against his will by his partner, any more than by anyone else, and
it is compulsory and involuntary if he refuses to join in such case
and is forced into it, as much as in any other enforced
bankruptcy."
And,
a fortiori, such a petition as this is an
involuntary proceeding to the extent that it also seeks to have the
nonconsenting partnership adjudged bankrupt as individuals.
In other words, insofar as Shugert's petition sought not merely
to have the partnership adjudged bankrupt as
Page 264 U. S. 503
against the defendants, but also to have them adjudged as
individuals, it was clearly an antagonistic proceeding. To that
extent, Shugert was not the "bankrupt," but stood in a position
analogous to that of a creditor seeking the involuntary
adjudication of his debtor. Even insofar as the petition sought to
have the partnership adjudged bankrupt, the defendants, as
nonconsenting partners, were entitled, under the specific provision
of General Order No. 8, to make defense "in the same manner as if
the petition had been filed by a creditor of the partnership."
Note 3 supra. Such a
proceeding, as any other litigated matter, requires adversary
parties, and manifestly, in the very nature of things, can only be
continued as long as there are adversary parties. In the proceeding
in the district court and in the circuit court of appeals, Shugert
was the petitioner in the bankruptcy proceeding, affirmatively
seeking relief against his partners by subjecting their property to
the payment of the partnership debts, and actively engaged in the
prosecution of his petition against them. As the cases now stand,
however, by reason of his death, there is no longer any petitioner
seeking the bankruptcy of the firm or of the defendants; no
adversary party insofar as the defendants are concerned.
The question whether Shugert's right to maintain the petition in
bankruptcy for the purpose of having the partnership and the
defendants adjudged bankrupt -- if any he had -- is one which
abated with his death, or one which survives to his proper
representatives in the personalty or realty involved so that the
bankruptcy proceeding may be continued in their names, is not,
however, free from difficulty. It is, so far as we are advised, one
of first impression. And it is one which we think should not be
determined
ex parte if there are any persons claiming to
be proper representatives of his interest in the proceeding
Page 264 U. S. 504
who desire to be admitted as parties for the purpose of
continuing it in his stead.
Under the circumstances, we conclude that we should now deny the
motions to dismiss the proceeding; with leave to any persons
claiming to be the proper representatives of Shugert's interest to
appear in this Court within thirty days from this date, setting
forth the capacity in which they so claim, and applying for leave
to be admitted as parties for the purpose of continuing the
proceeding. If this is done, the question whether the proceeding
should be dismissed as to the partnership and the defendants or
continued as to them by such representatives will then be
determined. But if no one thus appears, these cases will be
remanded with instructions to dismiss the proceeding insofar as the
petition seeks to have the partnership and the defendants adjudged
bankrupt, following by analogy the practice established in cases
that have become moot.
Heitmuller v. Stokes, 256 U.
S. 359,
256 U. S. 363;
Harlan v. Harlan, 263 U.S. 681.
The attorneys who filed the answer to the defendants' motions
will forthwith give notice of this ruling to the representatives of
Shugert's interest in the property involved, and also to not less
than three creditors of the partnership, and will, within such
thirty days, file with the clerk of this Court a verified return
showing to whom such notices were given.
It is so ordered.
[
Footnote 1]
The petition combined a "debtors' petition" (Form No. 1), a
"partnership petition" (Form No. 2), and a petition against the
defendants individually. There was no allegation that either the
partnership or the defendants had committed an act of
bankruptcy.
[
Footnote 2]
Two of them denied that they were members of the
partnership.
[
Footnote 3]
Section 5 of the Act provides that "a partnership . . . may be
adjudged a bankrupt."
General Order No. 8 provides that:
"Any member of a partnership who refuses to join in a petition
to have the partnership declared bankrupt shall be entitled to
resist the prayer of the petition in the same manner as if the
petition had been filed by a creditor of the partnership, and
notice of the filing of the petition shall be given to him in the
same manner as . . . in the case of a debtor petitioned against,
and he shall have the right to appear . . . and to make all
defences which any debtor proceeded against is entitled to take by
the provisions of the act."
210 U.S. App. 570.
[
Footnote 4]
The record does not show that any creditor appeared in the
proceeding in the district court.