In re Fuller , 9 F.2d 557 ( 1925 )

HAND, Circuit Judge.

This appeal raises the validity of the order which denied the petition of April 25, 1924, mentioned in the companion cause decided along with this. The facts may be found by referring to that opinion. The question is whether, if Stone-ham was in fact a dormant partner, he is concluded by the adjudication, so that the only issue left open to him is his membership im the firm.

It is a wholly different thing to say that a dormant partner may be brought into bankruptcy proceedings as a new party, and that he is bound by the earlier adjudication, if he was in fact such a partner. Perhaps that might he true, if the firm were regarded as an entity and its solvency dependent upon the sufficiency of the firm assets alone. We need not consider how far in such a case the dormant partner, having knowledge of the proceedings, might be hold in privity with the partners named and so concluded. The.difficulty with any such theory is that the issue of insolvency wholly changes when a new partner is introduced. The allegation in a petition that two members of a firm are insolvent, including as it must their separate estates, as well as the firm assets, becomes irrelevant when a third member is added. No matter how conclusively a dormant partner is estopped by such an adjudication, no adjudication of bankruptcy of the new firm can follow from it, because that presupposes a quite different determination.

Whatever may have been our earlier views, in Re Meyer, 98 F. 976, 39 C. C. A. 368, we are now precluded by Francis v. McNeal, 228 U. S. 695, 33 S. Ct. 701, 57 L. Ed. 1029, L. R. A. 1915E, 706, from taking any other view of partnership insolvency than that the issue is the sufficiency of all the individual estates and the firm assets. Indeed, we very clearly indicated, though we did not decide, in Re Samuels, 215 F. 845, 132 C. C. A. 187, that a new adjudication of bankruptcy was necessary, when there was a dormant partner. Any other view must treat the original petition as alleging, not only that the estates of the named partners and the firm assets were insufficient, hut that the same was true if one added the estates of whatever unknown and dormant partners might chance to be discovered. That would be plainly an absurdity, and no such evidence would have been admissible on the trial of such a petition.

As to the acts of bankruptcy we agree that the point is more doubtful. Whether a dormant partner is a privy, and estopped as to such issues by the adjudication in a proceeding which he might have joined, and which was plainly intended to reach the whole firm, we do not find it necessary to say. If so, it is evidence by an estoppel of record, and there may bo technical difficulties in using it as such in a proceeding which must end, if successful, in its suppression as a judgment. We think it unnecessary to engage in such niceties now. Ordinarily acts of bankruptcy are not a difficult part of the proof, and the petitioners may find it desirable on the trial to avoid treacherous questions of law by proving these anew. In order to affirm this order, it is enough that the issue of insolvency as now alleged was never pleaded, never proved, and never adjudicated. No degree of privity to any other issue is of the slightest moment.

Order affirmed.