Central State Bank of Jackson v. Harrington

DONAHUFj, Circuit Judge

(after stating the facts as above). The answer purporting to be the answer of the T. H. & A. Coal Company, Blanche Harrington, and Arthur G. Adams, filed by these two partners, is not the answer of the partnership. The partnership property and business was then in the custody and control of a receiver. The authority of these two partners to control its affairs, either as partners or agents of the partnership, or their nonconsenting partner, ended when the receiver was appointed, and the property taken over and the business conducted by him. The answer, therefore, must be taken as the answer of Harrington and Adams only, and as such it cannot he given the effect of a petition of the partnership in voluntary bankruptcy. This does not mean that one or more partners may not, during the continuance of the partnership, file a petition in voluntary bankruptcy and that the procedure thereunder as to the nonconsenting partner or partners shall bo the same as in an involuntary proceeding1. That question is not presented in this ease. This answer does not purport to be a voluntary petition in bankruptcy by the partnership and it lacks all the essential elements of such petition. A situation somewhat similar was presented in the case of Canute Steamship Co., Ltd., et al. v. Pittsburgh & West Virginia Coal Co. et al., 263 U. S. 244, 44 S. Ct. 67, 68 L. Ed. 287. In that ease the bankrupt withdrew its answer, denying that it was insolvent, and denying that one of the petitioners was a creditor and had a provable claim, and consented to an adjudication in bankruptcy. No importance was attached to this action on the part of the bankrupt, but the same questions presented by the answer of an intervening creditor were bear'd and determined adversely to the intervening creditor upon wholly different reasons.

This answer, however, and the fact that the other partner was in default for answer, should be considered by the court in determining1 the question of solvency and the issue as to acts of bankruptcy committed by the partnership within the four months next preceding the filing of the petition. Upon both of these issues the finding of the court is fully sustained by the evidence.

The primary question, however, is whether the three petitioning creditors were, in fact, bona fide creditors of the partnership. The petition avered “that your petitioners are creditors of the said Blanche Harrington, Arthur C. Adams, and Jay B. Thompson, as individuals and copartners of the T. H. & A. Coal Company, having provable claims against them in the aggregate in excess of securities held by them in the sum of upwards of five hundred dollars; * * * that the nature and amount of petitioners’ claims are as follows: Harold M. Harrington, money loaned to the said Blanche Harrington, Arthur C. Adams, Jay B. Thompson, individually and as copartners of the T. H. & A. Coal Company, aggregating the sum of $1,060, no part of which has been paid.” The petition further averred that there was due R. G. Royce for merchandise $6.25 and to John Walker for merchandise $5.17.

It is averred in the answer of the intervening creditor, the Central State Bank of Jackson, Mich., that “it is informed and believes that Harold M. Harrington, one of the alleged petitioning creditors, who filed said petition, js not a creditor of said partnership, and did not loan the said $1,000 as averred in said petition.” It is claimed, however, that this averment does not amount to a denial of the allegation that Harrington is a creditor, and that it does not come within the provisions of equity rule No. 30, which provides, among other things, that where the defendant is without knowledge he shall so state, and that such statement shall operate as a denial. We think this averment of the answer fully meets the requirement of rule 30, and that the averment that the intervening creditor - is informed and believes that Harold M. Harrington is not a creditor of the partners or partnership, and that he had not loaned them $1,000 as averred in the petition, is sufficient joinder of issue upon this question of fact, and 'that this was a question upon which the intervening creditor was entitled to be heard. Canute Steamship Co. v. Pittsburgh So West Va. Coal Co., supra.

The evidence offered on the part of the intervening creditor was competent and relevant to this issue. Its rejection was prejudicial error. Decree reversed, and cause remanded for further proceedings in accordance with'this opinion.