Court Opinion

ID: 8635634
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:44:45.514067+00
Date Added: 2024-06-11T16:55:54.979391
License: Public Domain

NELSON, District Judge.
It seems to me the equities are with the creditors of the old firm of Pease, Sherman & Hall. The dissolution of the firm, the subsequent bankruptcy of Sherman & Hall, who continued the business after Pease retired, and finally the bankruptcy of Pease, do not change the liability of the respective members of the old firm of Pease, Sherman & Hall to their creditors. The right of these creditors to pursue Pease after they had received a portion of their indebtedness from the estate of Sherman & Hall must be admitted. There is no pretense that they released him from his liability, though the assumption of the debts of the old firm by Sherman & Hall placed them under an additional and personal liability for all the debts of Pease, Sherman & Hall, which could have been recovered of them by the creditors, had they been solvent. Now, how does this case stand? Sherman & Hall, who took all of the assets of the old firm, have been declared bankrupts, and their estate has paid the creditors of that firm twenty per cent. There is a dissolution of the old firm, and all of the assets are disposed of, and Pease, who retired, is individually bankrupt. We thus have a firm "dissolved, no assets, and all the partners insolvent and in bankruptcy, without any voluntary or in invitum proceedings being instituted to declare them bankrupt as a firm. Under such circumstances, in my opinion, the individual creditors of Pease have no rights prior to the creditors of the old firm of which he was a member. Their claims have been duly proved, and they are entitled to share pro rata with the other creditors. The equity rule in regard to the rights of firm and individual creditors does not apply, for the reason that no proceedings have been instituted against the partnership under section 5121 of the Bevised Statutes.
The creditors of the old firm can therefore share pro rata with the individual creditors of Pease to the extent of the unpaid portion of their claims.