1. When the petitioner in an involuntary bankruptcy proceeding
dies before adjudication, the proceeding does not abate, but, under
Rev.Stats. § 955, may be prosecuted by his personal representative.
P.
268 U. S.
428.
2. The Bankruptcy Act gives no authority to adjudge a
partnership bankrupt upon a petition filed against it by but one of
its members. P.
268 U. S.
431.
3. Section 5c of the Bankruptcy Act, providing that the court of
bankruptcy having jurisdiction of one of the partners may have
jurisdiction of all the partners and of the administration of the
partnership and individual property, relates solely to the venue,
or the territorial jurisdiction of the court. P.
268 U. S.
431.
4. A petition by a partner to have himself, the partnership, and
the other partners declared bankrupt, and not purporting to be a
petition of the partnership or authorized by it, cannot be regarded
as a voluntary petition of the partnership. P.
268 U. S.
432.
5. An involuntary petition against a partnership must be filed
by creditors and allege an act of bankruptcy. P.
268 U. S.
432.
6. The authority conferred on this Court by § 30 of the
Bankruptcy Act to prescribe all necessary rules, forms, and orders
as to procedure and for carrying the Act into effect, is limited to
provisions for the execution of the Act itself, and does not
authorize additions to its substantive provisions. P.
268 U. S.
434.
7. General Order No. 8 and Form No. 2, in purporting to
authorize one or less than all the partners to file a petition
against the partnership without the consent of the others, do not
relate to the execution of any of the provisions of the Act itself,
and are therefore without statutory warrant, and of no effect. P.
268 U. S.
434.
Page 268 U. S. 427
8. A petition by a partner not maintainable against the
partnership held not maintainable against nonconsenting partners
individually. P. 434.
292 F. 116 reversed.
Certiorari to judgments of the circuit court of appeals which
affirmed orders of the district court denying motions to dismiss,
pro tanto, a petition in bankruptcy. General Order in
Bankruptcy No. 8 and Form No. 2, were abrogated by order of May 25,
1925.
MR. JUSTICE SANFORD delivered the opinion of the Court.
These three cases involve the same proceedings which were before
us at an earlier stage in
Meek v. Centre Banking Co.,
264 U. S. 499.
They arose out of a petition in bankruptcy filed by the respondent
Shugert in a federal district court in Pennsylvania for the
adjudication as bankrupts (a) of himself, (b) of a partnership
styled the Centre County Banking Co., in which he and the present
petitioners, Meek, Dale and Breeze, hereinafter called the
defendants, were alleged to be members, and (c) of the defendants
individually. The defendants resisted the petition insofar as it
sought to have the partnership and themselves adjudged bankrupts,
and moved to dismiss it to that extent. Orders denying these
motions were entered by the district court, and these, on petitions
to revise, were affirmed by the circuit court of appeals. 292 F.
116. Writs of certiorari were then granted. 263 U.S. 696.
Page 268 U. S. 428
Thereafter, but before the hearing in this Court, Shugert died.
The defendants then moved in this Court 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
abated by Shugert's death. Finding the petition to be in this
aspect an involuntary and antagonistic proceeding, and there being
then no adversary party before the Court, we granted leave to any
persons claiming to be representatives of Shugert's interest to
appear within thirty days and apply for leave to be admitted as
parties for the purpose of continuing the proceeding in his stead,
stating that, if this were done, the question whether the
proceeding should be dismissed as to the partnership and the
defendants, or continued as to them by such representatives, would
then be determined.
Meek v. Centre County Bank, supra, p.
264 U. S. 504.
Thereafter, the administrator of Shugert's estate seasonably
appeared and applied for leave to be substituted in Shugert's place
as the petitioner in the bankruptcy proceeding. The defendants
renewed their motions to dismiss, and the cases have been heard
both on this preliminary issue and on the merits of the
controversy.
1. The first question to be determined is whether Shugert's
death, before an adjudication had been made under the petition,
abated the bankruptcy proceeding as against the partnership and the
individual defendants, or whether it may be continued against them
by the administrator of his estate. When either of the parties in
any suit in any court of the United States dies before final
judgment, the executor or administrator of such deceased party may,
in case the cause of action survives by law, prosecute or defend
the suit to final judgment. R.S. § 955. In
Schreiber v.
Sharpless, 110 U. S. 76,
110 U. S. 80, a
suit on a federal penal statute, in which the defendant had died
before judgment, it was held that whether an action survives and
may be continued under this section "depends
Page 268 U. S. 429
on the substance of the cause of action," and that, since at
common law actions on penal statutes do not survive, and Congress
had not established any other rule in respect to actions on federal
penal statutes, the cause of action died with the person of the
defendant, and the suit could not be continued against his personal
representative. We do not think, however, that the doctrine of this
case applies to an involuntary proceeding in bankruptcy.
Such a proceeding, not being in the nature of a common law
action, is not abated by any rule of the common law. And, while
there is no express provision in the Bankruptcy Act [
Footnote 1] that the cause of action survives
the death of a petitioner before adjudication, we think that such
survivorship accords with the "substance of the cause of action"
and the nature and purpose of a proceeding in bankruptcy, which is
not a mere personal action, but is essentially in the nature of a
proceeding
in rem for the benefit of all the defendant's
creditors. And the filing of the petition brings his property into
custodia legis, with a view to a determination of his
status and the settlement and distribution of his estate.
Acme
Harvester Co. v. Beekman Lumber Co., 222 U.
S. 300,
222 U. S. 307;
Lazarus v. Prentice, 234 U. S. 263,
234 U. S. 266.
We conclude that an administrative proceeding of this character, in
which the property of the defendant is impounded for the benefit of
all of his creditors, does not abate because of the death of the
petitioner before adjudication, and that its prosecution may be
continued by his personal representative. The motions of the
defendants to dismiss the proceeding by reason of Shugert's death
are accordingly denied, and the administrator is granted leave to
be substituted as the petitioner in the proceeding and to prosecute
it in his stead.
2. This brings us to the consideration, on the merits, of the
motions made by the defendants in the District
Page 268 U. S. 430
Court to dismiss Shugert's petition insofar as it sought the
adjudication of the partnership, and of themselves as bankrupts.
The petition combined, in an anomalous and modified fashion, a
"debtor's petition" and a "partnership petition" (Bankruptcy Forms,
Nos. 1 and 2), with other averments. In it, Shugert alleged that
the partnership was insolvent and owed debts in excess of $1,000;
that each of the partners was insolvent, and they were unable,
jointly or severally, to pay the partnership debts; that he and the
partnership were willing to surrender their property for the
benefit of their creditors, and desired to obtain the benefits of
the bankruptcy law, and that the defendants had not offered to join
in the petition, and he was not informed of their intention in the
matter. It did not allege that either the partnership or the
defendants had committed any act of bankruptcy. The prayer was that
Shugert, the partnership, and the defendants individually be
adjudged bankrupt, that process be served upon the defendants, and
that proceedings be had as provided by the bankruptcy law and
General Order No. 8.
The defendants, who appeared specially, moved to dismiss the
petition as against the partnership and themselves on the grounds,
among others, that it was not authorized by the Bankruptcy Act and
that the court had no authority under it to adjudge either the
partnership or nonconsenting partners bankrupt. [
Footnote 2] The orders of the district court
denying these motions were affirmed by the circuit court of appeals
on the ground that the petition was maintainable under § 5 of the
Bankruptcy Act and General Order No. 8.
Section 5a of the Bankruptcy Act specifically provides that:
"A partnership, during the continuation of the partnership
business, or after its dissolution and before the
Page 268 U. S. 431
final settlement thereof, may be adjudged a bankrupt."
There hence can be no doubt that a partnership may be adjudged a
bankrupt as a distinct legal entity. But, since the Act does not
specify when it may be adjudged a bankrupt, to determine this
question, reference must be had to the general provisions of the
Act, in which, in accordance with § 1(19), the word "persons" is to
be construed as including "partnerships." The Act makes provision
for only two kinds of petitions upon which a person may be adjudged
bankrupt -- one a voluntary petition filed by him, the other an
involuntary petition filed against him by creditors. As to the
first, it is provided that any qualified person, except certain
specified corporations, may file a petition to be adjudged a
voluntary bankrupt, §§ 4, 59a, and as to the second, that creditors
having provable claims of a specified amount against an insolvent
debtor who has committed an act of bankruptcy within the preceding
four months, may file a petition to have him adjudged a bankrupt,
§§ 3b, 59b. [
Footnote 3] As
there is no other provision authorizing the filing of a petition in
bankruptcy, it necessarily results that there is no authority under
the Act to adjudge a partnership bankrupt except upon its own
voluntary petition or upon an involuntary petition filed against it
by creditors, and none to make such an adjudication upon a petition
filed against it by one of its members.
There is nothing in § 5c of the Bankruptcy Act, upon which the
administrator relies, that has any application to this question. It
merely provides that 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
Page 268 U. S. 432
-- that is, it goes solely to the question of venue or
jurisdiction of the bankruptcy court with reference to its
territorial limits.
See § 2 (§ 9586). And the decision in
Francis v. McNeal, 228 U. S. 695,
only involved the question whether, in a bankruptcy proceeding in
which a partnership had been adjudged bankrupt under an involuntary
petition filed against it by creditors, the court might administer
the separate estate of a partner who had not been adjudged bankrupt
individually.
It is clear that the present petition cannot be sustained as the
voluntary petition of the partnership for its own adjudication in
bankruptcy. It was filed and signed by Shugert alone, as the sole
petitioner. It did not purport to be filed by the partnership, and
was not signed by it or in its behalf. And, while there was an
incidental averment that the partnership desired to obtain the
benefit of the bankruptcy law, there was no allegation that this
statement was authorized by the partnership. On the contrary, it
was shown that the other partners had not joined in the petition,
and that their intention in reference to the matter was not known.
In short, the petition was framed as an involuntary petition
against the partnership and its nonconsenting members, and its
sufficiency must be tested as such. We are therefore not called
upon to determine whether a voluntary petition filed in the name of
the partnership by one member of the firm purporting to act in its
behalf could be sustained without an affirmative showing that it
was filed at the instance or with the consent of the other
partners.
It is also clear that the petition cannot be sustained as an
involuntary petition filed against the partnership under the
provisions of the Bankruptcy Act, since it was not filed by
creditors, the only persons authorized to file such a petition, and
furthermore did not allege that the partnership had committed an
act of bankruptcy.
It is earnestly insisted, however, that the right of a partner
to file such a petition against the partnership is
Page 268 U. S. 433
recognized by General Order in Bankruptcy No. 8. This General
Order 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 petition in the same manner as if it had
been filed by a creditor of the partnership; that notice shall be
given to him as in the case of a debtor petitioned against; that he
shall have the right to appear at the hearings and make proof that
the partnership is not insolvent and has not committed an act of
bankruptcy, and make all defences which any debtor proceeded
against might make, and that, if an adjudication of bankruptcy is
made upon the petition, such partner shall file a schedule of his
debts and inventory of his property as required in cases of debtors
against whom an adjudication is made. 172 U.S. Appendix, p. 656. It
is supplemented by Bankruptcy Form No. 2, providing for a petition
by less than all the members of a firm, alleging that they and the
other partners owe debts which they are unable to pay in full, and
that the petitioners desire to obtain the benefit of the Bankruptcy
Act, and praying that the firm be adjudged bankrupt. 172 U.S.
Appendix, p. 679.
It is clear that this General Order and Form contemplate that
less than all the members of a partnership may file a petition for
its adjudication as a bankrupt without alleging either that it is
insolvent or that it has committed an act of bankruptcy, and that
any member of the partnership who refuses to join in the petition
may resist it in the same manner as if the petition had been filed
by a creditor. In seeking to have the partnership adjudged bankrupt
as against the nonconsenting partners resisting such an
adjudication, it is manifestly an involuntary proceeding.
Meek
v. Centre County Bank, supra, p.
264 U. S.
502.
The question of the effect of this General Order and Form are
now, for the first time, presented to this Court for
determination.
Page 268 U. S. 434
The authority conferred upon this Court by § 30 of the
Bankruptcy Act to prescribe all necessary rules, forms, and orders
as to procedure and for carrying the Act into effect, is plainly
limited to provisions for the execution of the Act itself, and does
not authorize additions to its substantive provisions.
West Co.
v. Lea, 174 U. S. 590,
174 U. S. 599.
And see Orcutt Co. v. Green, 204 U. S.
96,
204 U. S.
102.
General Order No. 8 was evidently taken from a like general
order under the Bankruptcy Act of 1867, of which it is, in the
main, a transcript, and Form No. 2 is largely a copy of a
corresponding form prescribed under said earlier Act. [
Footnote 4] The Act of 1867, however,
while not providing that a partnership could be adjudged a bankrupt
as a separate entity, expressly provided that its property should
be taken and administered in cases
"where two or more persons who are partners in trade shall be
adjudged bankrupt, either on the petition of such partners, or any
one of them, or on the petition of any creditor of the
partners."
14 Stat. 517, c. 176, § 36. The former general order and form
were therefore appropriate methods of procedure for carrying into
effect the provision as to petitions by one of the partners. In the
present Act, however, there is no corresponding provision for
adjudging a partnership bankrupt or administering its property upon
the petition of one of the partners. General Order No. 8 and Form
No. 2, in purporting to authorize one or less than all of the
partners to file a petition against the partnership without the
consent of the others, do not relate to the execution of any of the
provisions of the Act itself, and therefore are without statutory
warrant and of no effect.
We conclude that Shugert's petition was not maintainable against
the partnership. And,
a fortiori, it was not
Page 268 U. S. 435
maintainable as an involuntary petition against the
nonconsenting partners individually.
The motions made by the defendants in the district court to
dismiss the petition as against the partnership and themselves
individually should have been granted. The decree of the circuit
court of appeals is accordingly reversed, and the cause remanded to
the district court for further proceedings in conformity to this
opinion.
Decree reversed.
[
Footnote 1]
Act of July 1, 1898, c. 541, 30 Stat. 544.
[
Footnote 2]
Two of the defendants also denied that they were members of the
partnership.
[
Footnote 3]
At least three creditors are required unless all the creditors
are less than twelve in number, in which case, one creditor may
file the petition. § 59b.
[
Footnote 4]
Brightly's Bankrupt Law: Gen. Ord. No. 18, p. 105; Form No. 2,
p. 142.