Court Opinion

ID: 8746943
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:10:59.220226+00
Date Added: 2024-06-11T17:00:43.747647
License: Public Domain

J. B. McPHERSON, District Judge.
I think the referee was right in allowing this claim. The argument of the exceptant is based upon the proposition that the money in dispute was “left in the business” of the bankrupt by the claimant, — carelessly, it may be, and not by design, but left there at all events, — thus swelling the apparent assets of the enterprise. From this proposition the conclusion is said to follow that the claim of the corporation partner must be postponed to the claims of the general creditors. This conclusion, in my opinion, is not sound, and finds no support in Wallerstein v. Ervin (C. C. A.) 112 Fed. 124. Indeed, the sum now in dispute was expressly declared by the court of appeals to be outside the scope of that decision; and I am in a position to say with confidence that the district court, in deciding the case below (109 Fed. 135), gave the matter no consideration. The facts necessary now to be taken into account are these: When the illegal partnership was formed between Barnes & Co. and Ervin, Page & Co., Incorporated, under the firm name of R. T. Ervin & Co., Barnes & Co. owed the claimant Ervin, Page & Co., Incorporated, a valid debt of $2,000, but by some mistake this debt was overlooked, and it was not provided for by the settlement that preceded the formation of the partnership.- The oversight did not obliterate the debt, however, nor did the formation of the partnership transform the debt automatically into a virtual advance toward the partnership business. It is true that, if the debt had been known and had been paid, the partnership would have been $2,000 poorer, and it may be conceded that its apparent assets and its credit were therefore larger by that sum; but this was an inevitable incident of an innocent mistake. The corporation was decided to be a de facto partner, and its claim upon advances to the partnership was postponed to the claims of general creditors; but its disability as a partner does not prevent it from prosecuting a valid claim against the other partner, contracted before the illegal partnership was formed, and never intentionally used for the benefit of the partnership business. The claim does not grow out of the partnership relation, but out of an independent and antecedent transaction.
The allowance of the claim is approved.