Case Name: Robinson W. Cator, and others, trading as Armstrong, Cator & Co. vs. Hadasseh Martin and Helen Marr, trading as Misses Martin & Marr
Court: Court of Appeals of Maryland
Jurisdiction: Maryland
Decision Date: 1882-01-19
Citations: 57 Md. 397
Docket Number: 
Parties: Robinson W. Cator, and others, trading as Armstrong, Cator & Co. vs. Hadasseh Martin and Helen Marr, trading as Misses Martin & Marr.
Judges: 
Reporter: Maryland Reports
Volume: 57
Pages: 397–407

Head Matter:
Robinson W. Cator, and others, trading as Armstrong, Cator & Co. vs. Hadasseh Martin and Helen Marr, trading as Misses Martin & Marr.
Cmistmetion of Art. 48, of the Code, Insolvent Law, as Amended by the Act- of 1880, oh. 172.
A joint proceeding against soveral as partners, will not lie under tin1 Insolvent Law of this State, but such proceeding must be taken against each separately.
AppeáIí from the Circuit Court for Washington County.
In February, 1881, Robinson W. Cator and others, trading as Armstrong, Gator & Co., filed a petition in the Court below, in whicli they alleged that they were creditors of Hadasseh Martin and Helen Marr, (femes sole) co-partners, trading as Misses Martin & Marr, residents of Washington County, Maryland, and merchants at Hagerstown in that county, in the sum of $829.36, for goods sold and delivered by the petitioners to Hadasseh Martin and Helen Marr, for part of which account Misses Martin & Man* had made to them, payable to their order, their two promissory notes, one dated the 21th July, 1880, and the other dated the 12th December, 1880, each for $102.50, the first payable five months, and the other one month after date, and when paid to be credited on the account, but that neither of them were paid ; and that Hadasseh Martin and Helen Marr, merchants, being in contemplation of insolvency in the one case, and insolvent in the other, within sixty days before the filing of the petition, suspended payment of their negotiable paper, and failed to resume payment thereof within twenty days ; that Hadas seh Martin and Helen Marr being insolvent, did, and each of them did, on the 1st January, 1881, execute a deed to Henry Kyd Douglas and John F. A. Remly of all their property and effects, in trust for the creditors of the said Hadasseh Martin and Helen Marr, giving to the First National Bank of Hagerstown a preference in the payment of a certain promissory note for $850, said note not being for the payment of wages or salaries to clerks, servants or employes, made by the said Hadasseh Martin and Helen Marr, which note was held by the bank, contrary to the provisions of the Code, Article 48, and the Act of 1880, ch. 112, amendatory thereof • which said deed was recorded on the 3rd January, 1880, within sixty days before the filing of this petition, and therewith filed ; and thatthe deed was made with the intent to delay, hinder and defraud creditors.
The petitioners then alleged that they were advised* that Henry Kyd Douglas and John F. A. Remly had taken possession -of certain property of Hadasseh Martin and Helen Marr, consisting principally of millinery, ribbons, white goods and notions, in the store-room of Misses Martin & Marr, in Hagerstown, and that the said Douglas and Remly had disposed of certain of said goods, and were endeavoring to dispose of the residue, with the intention of applying the moneys derived from such sales, to the payment of the debts of Hadasseh Martin and Helen Marr, in accordance with the terms of the deed.
The petitioners therefore prayed process against the said Hadasseh Martin and Helen Marr, and that each of them might be adjudicated insolvents, under the provisions of the Insolvent Laws of this State, and that pending the determination of the application for such adjudication, an order might be passed, in the nature of an injunction, to restrain the said Hadasseh Martin and Helen Marr, and each of them, from disposing of any of their property, and also to restrain the said Henry Kyd Douglas and John E. A. Eemly, their agents and employ és, from selling or disposing of any of said property, or disposing of any of the funds or moneys derived from sales already hy them made, or collected by them, as of the property or credits of the said Hadasseh Martin and Helen Marr, since the filing of the deed.
On this petition, hy order of Court, summons and injunction were issued.
The answer of Hadasseh Martin and Helen Marr, partners, trading as Misses' Martin & Marr, admitted their indebtedness to the petitioners; the making of the deed of trust to II. K. Douglas and J. E. A. Eemly; hut denied having committed any act of insolvency, either hy the making of said deed of trust, or in a.ny other manner, as charged in the petition.
By agreement of counsel, the following facts were admitted: the existence of the co-partnership of Misses Martin & Marr, as set forth in the petition; and of that of Armstrong, Gator & Co.; the correctness of the claim of Armstrong, Cator & Co., against Misses Martin & Marr, as set forth in the petition and exhibit, and that the same is wholly unpaid; the genuineness of the signatures of the Misses Martin & Marr, to the notes described in the petition; the due execution of the note of $850, described in the petition and deed of trust; the execution of the deed of trust; that the partnership property conveyed hy said deed of trust would approximate in value tno sum of the inventory — about $3300. Money realized about $1500 ; that the individual property conveyed by said deed of trust was very little; and that the partnership debts of the firm of Misses Martin & Marr, largely exceeded the partnership assets, and the assets of the individual members of said firm aggregated about $2700.
Hadasseh Martin and Helen Marr severally demurred to the petition.
The Court below (Alvey, J.) dismissed the petition with costs to the defendants, and filed the following opinion:
“ The acts of insolvency charged in the petition, assuming the facts alleged to be true, would certainly bring the parties proceeded against within the terms of the 23rd section of Art. 48, of the Code, as amended by the Act of 1880, ch. 112, and render them subject to the involuntary proceedings provided for by sec. 24 -of that Article. But this is a- joint proceeding, taken against the defendants as partners; or in other words, it is a proceeding against a firm or partnership as such, to which the defendants have objected by demurrer; and the question is, whether- such joint proceedings can be maintained under the provisions of our insolvent law. It presents a question of practice, of very considerable importance, though I think, upon reflection, after careful examination of the provisions of the statute, it is quite clear that such proceeding cannot be maintained.
“It was certainly never supposed, so far at least as I am informed upon the subject, that either the original insolvent debtor’s Act of 1805, or any of its various supplements, ever contemplated joint applications by partners or partnerships, for the benefit of the insolvent law. Indeed, it is clear beyond all- question, that they did not; for the provision with reference to the imprisonment of the applicant, as well as other conditions and requirements of those statutes, made it manifest that they contemplated only separate individual applications, and not joint applications, or proceedings by partners or others. If all the members of a firm, whether few'or many, became insolvent, and desired to obtain the benefit of the-insolvent law, they had to make separate and distinct applications. And I think it equally clear, that the Act of 1854, which is the present insolvent law of the State, except as it has been amended by the Act of-1880, made . no change in this respect. The amendment of 1880,. while it adds a new feature to-our insolvent system, copied,, it. would seem from the bankrupt law of the United States. of 1867, makes do provision whatever for proceeding against partnerships or parties, or partners. The whole text of the law, and each and all of its provisions, plainly show that it only was intended to apply to separate individual cases of insolvency, and not to any joint proceedings against partners. And it being beyond question or dispute, that the law, before the last amendment, did not authorize joint voluntary applications on the part of debtors, there is no reason whatever to be assigned, why the application by creditors under the involuntary clause, added by the amendment, should be allowed to be taken against any number of persons jointly, in the absence of express authority for such proceeding. There is nothing in the law that affords the slightest ground for supposing that any such feature was intended to he introduced. On the contrary, sec. 24 of the Article expressly provides, that from the lime that the party is brought in, and adjudged to be an insolvent, “ the same proceedings shall he had as hereinbefore prescribed, in relation to persons who shall apply for the benefit of the provisions of this Article.”
“By the United States Bankrupt Law of 1867, ch. 176, Eevised Statutes, secs. 5121, 5122, partnerships and corporations were expressly provided for. But from the express provisions made, it is -plainly to bo inferred, that in the absence of such express provisions, the Act would no more have applied to partnerships, than to corporations; that provision, therefore, in the Act of Congress, is no -authority for supposing that the same thing was intended by our own amendatory Act of 1880 ; on the contrary, the inference is strongly the other way, no express provision having been made upon the subject by our statute.
“The statute must be construed to provide for cases of partnership, as such, or, that it has not so provided. It is not a mere question of form or convenience, to be adopted at the pleasure of the creditor, or not, at his simple election. The question is, whether the proceeding be fairly within the meaning and contemplation of the law, or otherwise; and I think, it is not within the meaning.
“By the first section of the Article, the application by the debtor, can only be made in the city or county where he may reside, and by the 24th section, it is provided, that the petition under the involuntary clause, can only be-filed “in any of said Courts having the right to take jurisdiction of the debtor, so committing any act of insolvency,” &c. Now, we know, that many of the firms doing business in the City of Baltimore, and in the counties too, are composed of members residing in different localities and jurisdictions, and no insolvent proceedings could be had against these different members, except in the particular-jurisdictions of their residence, and if the law had designed to provide for a joint proceeding against the partners, and to have all the estate of all the partners jointly administered in one jurisdiction, it would have been eminently necessary and proper, to have made special provision for such case.
“Then again, by the same section 24, it is provided, that after the party is adjudged an insolvent, “ the said debtor-shall thereupon, immediately execute the schedule and lists of debts, verified by his affidavit, as provided by section one of this Article, and the debtor shall be entitled to a discharge from all debts and contracts made before the filing of the petition in this section mentioned, in the same manner, and to the same extent, and with the same exceptions, as though- he had made application, as provided in section one of this Article; now, if the proceeding is to be a joint one, how, in obedience to this requirement of the law, could three or four, or it might be a dozen' partners, of which a partnership might be composed, verify and swear for each other, as to the correctness and bona fides of schedules of property, and the good faith of acts, &c., that related not only to partnership affairs, hut to the separate estate and affairs of each partner. Each partner, of course, would have to assign not only his interest in the assets of the partnership, but all his separate estate, and therefore .separate deeds would have to he made. The only object of a joint proceeding would be to have all the estate of the partners administered together, and asoné fund ; but there would he great difficulty and hardship in many cases in this. In the first place, there would be difficulty in the selection of the trustee!. What creditors would participate in the selection ; all the creditors of all the partners generally,' or only the joint creditors; some partners might have very small assets and a very large number of creditors, and in such ca.se it would not be fair, that those creditors should control in the selection of trustees for the administration of other persons’ estates. Then, too, the mixing up the several separate estates, could not fail to produce trouble and confusion.
“ The insolvency of the partnership, of course, involves that of all the members, except in the case of a limited partnership ; for the simple reason that the private property of each member is liable for all the debts of the partnership. But individual partners may be insolvent without, of necessity, rendering the partnership insolvent. Each partner may be proceeded against as an insolvent debtor, and if all the partners are declared insolvent, there is no greater difficulty in settling the affairs of the partnership than there has heretofore been, under our insolvent laws, where members of partnerships have applied for the benefit of the insolvent law, and their interests in the partnership assets have passed into the hands of trustees. In all such cases the partnerships were dissolved, and accounts taken to ascertain the interest of the insolvent after payment of debts.”
Whereupon the petitioners appealed.
The cause was submitted to the Court upon briefs.
Edward Sta7ce, and Lewis G. Smith, for the appellants.
All the allegations of the petition are admitted, and the relief prayed for is denied solely because separate petitions were not filed against each of the parties proceeded against. The petition alleges “ that the said Iiadasseh Martin and Helen Marr, being insolvent, did, and each of them did,” commit the several acts of insolvency charged. It is not contended that where A. and B. (partners., if you please,) each commit a separate and distinct act of insolvency, the one in nowise connected with, interested in, or affected by, the act of the other, proceedings could be instituted against them in one and the same petition. But, in our case, the defendants each commit the same act, or, if you will, join in the commission of the same act, which affects the same property, and the same creditors. In other words, the defendants have no property save that which they hold as partners, owe no debts save partnership debts, and as partners, and as individuals, unite in the same acts of insolvency.
Why the necessity, then, of subjecting creditors to the expense of two proceedings, in each of which there would be the same allegations, the same proof, the same property, and the same parties. As the acts of insolvency were committed at the same instant of time, th.e separate petitions would be filed against each of the defendants at the same time. -A preliminary trustee in each case, would be appointed on the same (lay. Which of them would be entitled to the property ? Which of the permanent trustees would be entitled to the property ?
By express provision, the Bankrupt Law was made to apply to corporations and joint stock companies,- — the 37th section reading as follows : “And be it further enacted, that the provisions of this Act shall apply to all moneyed, business or commercial corporations and joint stock com- panics,” &c., &c. In no section of the Bankrupt Law is there found an express provision making it applicable to partnerships, as in the case of corporations. But sec. 36 assumes that the general language of the Act includes partnerships, and then proceeds to lay down the practice in such cases. So with our insolvent laws ; the general language of the Act of 1880 includes partnerships, and in the absence of express regulations as to the practice, the Courts must adopt such regulations as will best sub-serve the intent of the Act.
There is no provision in the Act of 1805, or in any of the subsequent statutes on the subject, which would have prevented two parties, circumstanced as are the defendants, from uniting in the same petition as voluntary insolvents.
The great end sought by involuntary insolvency is to compel an equal distribution of the insolvent’s property among his creditors, when it is insufficient to pay the whole indebtedness. This is the object in our system. Is it to ho hampered by technicalities, or in the absence of express provisions as to the mode of procedure, will the Courts approve of that form which will attain the end with the least expense ? From the language of the petition, the appellants are entitled to relief, whether the defendants be regarded in the light of partners, as such, or as separate individuals uniting in the same acts.
//. K. Douglas, and J. F. A. Bemly, for the appellees.
If it is possible for us to add anything effective to the opinion of Judge Alvey, it is not much. In addition to what he has said in regard to the Bankrupt Law of the United States, we may say that under the general Bankrupt Law’, as set out in the Revised Statutes, partnerships or corporations might have voluntarily gone into bankruptcy, or involuntarily been forced into it, because the Revised Statutes declare (ch. 1, sec. 1,) “The word person may extend and he applied to partnerships and corpora tions.” And yet Congress thought it necessary, in the Bankrupt Law of 1867, to provide expressly for partnerships and corporations, and to establish machinery for procedure in cases of their bankruptcy. Otherwise, it is apparent from reading sections 5121 and 5122 of the Revised Statutes, that although the general Bankrupt Law may have included partnerships and corporations, such a construction could not have been made effective in proceedings against them, for want of machinery. There is nothing in our Insolvent Law to take the place of these sections, and there is no provision in our Code that “person ” may include or mean partnership and corporation. This position is further illustrated by the law of Massachusetts, as we can gather it from the decisions, in the absence of the statutes or code. There it seems a proceeding can be instituted by partners as a partnership, or against them, by virtue of the Act of 1838, authorizing it. Apparently it gives the remedy and provides the modus. The difficulty suggested by Judge Alvey, which would arise, if proceedings against partnerships were permitted in this State, when different partners reside in different counties, while the petition can. only be filed in a Court having jurisdiction of the debtor, seems to be provided for by the Massachusetts statute, even if one of the partners is a non-resident. McDaniel vs. King, et al., 5 Cush., 469.
But the petition in the case at bar, would not be good under the law of Massachusetts. It is- directed specially against the Misses Martin & Marr, as partners, and does not make the distinct allegation that both the partnership and'the partners, individually are insolvent. This it ought to do. A partnership cannot be said to be insolvent while any of the partners are able to pay its debts. Here the petition is apparently directed entirely against the partnership, and all of its allegations are very indefinite. Dearborn vs. Keith, 5 Cush., 226; Parker vs. Philips, 2 Cush., 175; Hanson vs. Paige, 3 Gray, 239.
(Decided 19th January, 1882.)

Opinion:
By the Court.
This cause was submitted upon the briefs without argument, and lias been since carefully considered; and we affirm the order appealed from for the reasons so well assigned in the opinion of the learned Judge of the Circuit Court, before whom the case was tried. See also Gable and others vs. Scott, Knell and others, 56 Md., 176.
Order affirmed.