Re Bennett & Amos.

A partner petitioning, under such circumstances, against himself and his copartner, must prove that the latter is insolvent in the ordinary sense of being unable to pay his debts, including the joint debts.

Semble, the court would have power to retain such a petition until the solvent copartner should have paid the joint debts.

Bennett petitioned for adjudi

BANKRUPTCY OF PARTNERS. cation against himself and his late partner, Amos. It appeared in evidence that the firm was dissolved in December, that Bennett received a conveyance of all Amos's interest in the joint property, and undertook to pay all the joint debts, and that Bennett gave a bond to Amos, with one Haynes as surety, conditioned to pay all said debts and to save Amos harmless therefrom.

The plaintiff and defendant had kept an eating-house together for about a month, had not agreed in the management of the business, and had separated upon the terms above mentioned: debts for furnishing and supplying the rooms were still outstanding to the amount of $2,000, or more. Amos testified that he was solvent. It was admitted that Haynes, the surety, was abundantly able to respond.

W. W. Blackmar & H. N. Sheldon, for the petitioner.

I. T. Drew & A. Russ, for the respondent.

LOWELL, J. I ruled in Stowers's Case, 1 Lowell, 528, that a partner would not necessarily be estopped from filing a petition in bankruptcy against the firm, by the fact that, upon a recent dissolution of the partnership, he had undertaken to pay all the joint debts. The point is a nice one, but does not need to be reviewed at present.

In this case, the evidence decidedly preponderates in favor of the proposition that Amos is not insolvent. The definition of insolvency which applies to traders in matters connected with preferences, namely, a present inability to pay the debts as they mature, does not govern a case of this kind; because the retired partner is not necessarily insolvent in not paying debts for which he had received an indemnity, and which ought to be paid by the remaining partner.

Sect. 36 of the bankrupt act (Rev. Sts. § 5121) does not expressly provide under what circumstances two partners may be adjudged bankrupt, on the petition of one of them; but by neces

Re Bennett & Amos.

sary intendment refers us to sect. 11 (Rev. Sts. § 5021), which requires a debtor to set forth in his petition that he is unable to pay his debts in full, not that he is unable to do so when and as they mature. Accordingly the form of a petition by copartners, as prescribed by the supreme court, avers that the members of the copartnership owe debts which they are unable to pay in full; and the petition in this case follows that precedent.

Now, I do not doubt that for many purposes under the bankrupt act a firm may be considered insolvent when its joint assets will not enable it to pay its joint debts as they mature. But I do very much doubt whether a partner of undoubted solvency can be made bankrupt by his copartner by evidence that the firm is insolvent in that sense. If there has been a joint act of bankruptcy, the creditors may proceed against both; but in that case the solvent partner would have an opportunity to clear himself by paying all the joint debts, which he cannot safely do by intrusting the money to his insolvent copartner.

In Thompson v. Thompson, 4 Cush. 127, which is a leading case upon the above-mentioned definition of insolvency, the remarks of the court seem to take for granted, that, if the firm cannot pay its debts as they mature, either partner may petition. But the point was not decided in that case, and has since been held otherwise by the same court: Pierce v. Stockwell, 11 Cush. 236; Hanson v. Paige, 3 Gray, 239. In the latter case, Thomas, J., in delivering the judgment, and dealing with the objection that it was not alleged in the petition that the partners in their individual capacity were insolvent, says, "We cannot doubt that there must be a substantial averment of this fact; for if one of the partners were solvent, such solvent partner would have the legal right of settling the affairs of the partnership. . . . Again; as each partner is liable in solido for the debts of the company, a partnership cannot, with strictness, be said to be insolvent, while any of the partners are able to pay its debts." p. 242. In this case there is no evidence that the firm is insolvent in any sense, excepting that certain of its debts are outstanding and overdue. The evidence seems to prove that the bankruptcy was contrived between Bennett and the surety on the bond, and was intended to work in some way for the benefit of the latter.

Re Bennett & Amos.

Whether he could escape his liability in this way I do not say, but he seems to have been advised that he could; while, on the other hand, the creditors appear to be content to rest on the responsibility of Amos, fortified as it is with the bond and the admitted ability of the surety. Several of them have so testified. This bond seems, of itself, to make Amos solvent, since he is not proved to owe any considerable amount of separate debts, and it would work a delay and injury to the creditors, though they might not suffer eventual loss, to complicate the matter by proceedings in bankruptcy.

The English law had formerly a great deal to say about concerted bankruptcies, and a great many adjudications were set aside by the lord chancellor, and afterwards by the courts of bankruptcy, because they were obtained from bad motives, and to work some collateral result other than the benefit of the creditors. I doubt if our law, or, indeed, the latest statute in England, leaves much discretion to the courts in this matter. Under our statute there would seldom be occasion for the exercise of such a discretion, and I have seen no statute or decision which gives or claims it in express terms, though there are some intimations one way and the other. I am not at present satisfied that it exists.

A recent amendment to the bankrupt law makes a collusive bankruptcy possible at present. It gives an advantage, in respect to a discharge, to those debtors who are put into bankruptcy against their will, and thereby encourages an actual delay on the part of insolvent debtors in coming before the court, while the same law throws difficulties in the way of the creditors, by requiring a certain proportion of them to petition. The consequence is, a temptation to debtors to procure a petition to be brought against them, and to admit the sufficiency of one that is insufficient. Before this amendment, a collusive bankruptcy was unknown, in fact, and useless to any one, because our proceedings gave no advantage to one sort of bankruptcy over another. But even now, if it should be discovered in the course of the proceedings, after adjudication, that the petition was collusive, or insufficient, the remedy probably would be, not a dismissal of the proceedings, but a denial to the bankrupt of the peculiar benefit

Re Whipple.

which involuntary proceedings give him. Assuming no discretion in this case, yet as I find the petition to be brought by one partner for ends of his own, it becomes me to require the petitioning partner to make out his case fully and clearly. I am not satisfied that the petitioner Bennett has made out the insolvency of his late partner Amos, the defendant, under any test which can be applied in such a case. I adhere to an intimation which I made in Stowers's Case, that the court probably has power to see that the joint debts are paid before dismissing the petition, if any creditors request such action; but there is no such application in this case.

Adjudication against Bennett only. Petition dismissed as to Amos.

Re WHIPPLE.

MARCH, 1875.

In deciding whether a composition should be approved or rejected, it should be compared with what the creditors would receive through an assignee, not with what the debtor might possibly be able to pay them.

The act of congress puts upon the judge the responsibility of approving or rejecting a composition.

It cannot be assumed that any composition accepted by the required proportions of creditors is preferable to bankruptcy.

BANKRUPTCY.-COMPOSITION.-The bankrupt offered a composition of thirty-three and one-third per cent, which was accepted by more than the necessary proportion of creditors in number and value, but was opposed by a minority.

The evidence tended to show that the assets consisted principally of two pieces of land, with the buildings, &c., one of which was the planing-mill, machinery, and fixtures, where the business of the debtor was carried on. In his list he valued this property at $12,000, subject to a mortgage for $2,000, and the other, which was a lot of land with four tenement houses, at $7,000. After deducting from the aggregate of debts those that were either secured or privileged, and from the assets all liens

Re Whipple.

and privileges, there remained, according to the debtor's statement, assets of the value of $15,000 to pay debts of somewhat less than $33,000. The creditors insisted that the assets applicable to the unsecured debts were worth at least $19,000.

W. S. Gardner & G. W. Morse, for the objecting creditors. T. Weston, Jr., & N. Tebbetts, for the bankrupt.

LOWELL, J. Our system of ending bankruptcy by a composition has been borrowed from England, and theirs was borrowed from Scotland. In the latter country, the court was at one time required to pass upon the reasonableness of the offer of composition; but in England the action of the creditors is final, in the absence of fraud. I have looked at the decisions in the courts of both countries. They are well worth referring to, but are not numerous enough to have brought the subject up in all its possible aspects, or to enable us to reconcile some seeming contradictions in the dicta.

In Scotland the disposition was strong to uphold, as reasonable, a composition that was fairly adopted; and in England, on the other hand, to set aside as fraudulent one, that was decidedly unreasonable. See Smith v. Robertson, 8 Court of Session Cases, 1055, affirmed in the Lords, 2 Dow & Clark, 312; Kilpatrick v. Wighton, 5 Court of Session Cases, 895; Ex parte Williams, L. R. 10 Eq. 57; Ex parte Cowen, L. R. 2 Ch. 563; Hart v. Smith, L. R. 4 Q. B. 61; Ex parte Linsley, L. R. 9 Ch. 290.

It will not be possible to lay down many general rules. But one that I have heretofore announced I adhere to, that the judge must make his comparison, not with what the debtor might possibly have done, but rather with what assignees in bankruptcy could do. The elements of this comparison must vary with the amount of debts, the amount and character of the assets, the nature of the business that is to be wound up, and many other circumstances. How far congress intended to protect creditors against each other, and how far the court is to inquire into motives, are questions of no little difficulty. Some creditors may vote for the resolution without much inquiry, from a general and not altogether unfounded idea, that bankruptcy is to be avoided at all risks; some out of kindness to the debtor; some from a