In considering the application of the bankruptcy act to persons or corporations from the standpoint of nature of occupation or business, we have incidentally found that a corporation is subject to the bankruptcy act as has been noted.
An unincorporated company may be adjudicated a bankrupt.
The act provides that "any unincorporated company" (owing the requisite amount) "may be adjudged an involuntary bankrupt." This designation is used to apply to concerns which are not incorporated and which are not partnerships.
For example. The Order of Sparta was an unincorporated concern whose object was to establish a fund for payment of death claims. Held, "an unincorporated company" within the meaning of the law and subject to involuntary bankruptcy.62
62. Order of Sparta, (C. C. A. 3rd Cir.) 39 A. B. R. 523.
Partnerships and the partners therein, are subject to voluntary and involuntary bankruptcy.
The Bankruptcy Act gives considerable attention to the subject of partnerships.63
(1) Provisions of act.
"A partnership during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt." "In the event of one or more, but not all, of the members of a partnership being adjudged bankrupt, the partnership property shall not be administered in bankruptcy, unless by the consent of the partner or partners not adjudged bankrupt, but such partner or partners not adjudged bankrupt, shall settle the partnership business as expeditiously as its nature will permit and account for the interest of the partner or partners adjudged bankrupt."64
(2) The partnership as an entity under the act.
A partnership is not an entity, but an association of individuals. The partners are individually jointly liable for partnership debts. Claims of the partnership are the claims of the partners. They are the creditors and debtors of those with whom they deal, and there is not separate entity existing legally apart from them in the sense that a corporation exists apart from its shareholders.
63. Bankr. Act 1898, SEC. 5; General Orders in Bankr. No. VIII.
64. See also other provisions of SEC. 5, Appendix A, post.
The language of the partnership act in allowing a petition to be filed by or against a partnership seems to make it in partnership practice an entity.65 But that this is its legal effect is doubtful. A recent United States Court decision has said: "Ordinarily it would be impossible that a firm should be insolvent while the members of it remained able to pay its debts with money available to that end. A judgment could be got and the partnership debt satisfied on execution out of the individual assets. . . If as in the present case, the partnership and individual estates together are not enough to pay the partnership debts, the rational thing to do, is to administer both in bankruptcy."66
In an Illinois case, lately decided, the court said: "It necessarily follows that in an involuntary proceeding, where the act of bankruptcy charged is one involving insolvency of the partnership, there can be no adjudication against the partnership, unless it and all its members are insolvent, and upon an adjudication of insolvency, the assets of all the partners are turned into the proceeding for administration."67
These cases point in the right direction. It would be unfortunate to have a different view of a partnership prevail under the bankruptcy act than prevails under the general commercial law.
A minor cannot be adjudged a bankrupt except as to debts which he cannot avoid.
A minor's debts are voidable by him. Hence, bankruptcy proceedings would seem futile.68
65. In re Hansley & Adams, (D. C. Cal.) 225 Fed. 311.
66. Francis v. McNeal, 228 U. S. 695.
67. Abbott v. Anderson, 265 111. 285.
68. In re Duiguid, (D. C. N. C.) 100 Fed. 274; In re Dunni-gan Bros., (D. C. Mass.) 95 Fed. 428.
But some obligations are binding upon a minor. Thus his liability to pay for necessaries supplied him and in some states his liability if in business for himself is not avoidable. Hence bankruptcy proceedings in such case seem logical. So it has been held that a judgment for a tort against a minor is a liability dischargeable in bankruptcy.69
An insane person cannot be made a bankrupt. If he becomes insane after adjudication and while the proceedings are pending this will not abate the proceedings.
An insane person cannot commit an act of bankruptcy or be made a bankrupt in an involuntary proceeding and certainly he is not a proper person to file a petition. If after the petition is filed and the adjudication entered he becomes insane, the proceedings will not abate.70
The estate of a deceased person, though insolvent, cannot be taken into a Court of Bankruptcy. It is to be administered in the usual way in the Court of Probate.
An insolvent estate of a decedent is to be administered and wound up as other estates, that is, in a Court of Probate. But where a person is adjudicated a bankrupt and dies while the proceedings are still pending, the estate will continue to be administered by the bankruptcy court.
An alien who resides or is domiciled or has a place of business, or property in the United States, may file a petition in bankruptcy or have a petition filed against him.
69. In re Walrath, (D. C. N. Y.) 24 A. B. R. 541.
70. In re Kehler (D. C N. Y.) 153 Fed. 235.
An alien may be a bankrupt under our law provided he lives, has a place of business, or owns property here.71