has an implied authority to sign the firm name to negotiable paper for partnership purposes. This authority goes no further than to sign the firm name thereto. He cannot execute such paper upon behalf of the firm, even though for partnership purposes, in any other name. Hence it was held in the case of Kirk v. Blurton, 9 M. & W. 284, that, where John Blurton and Charles Habershon were partners doing business under the firm name of John Blurton, Blurton was not liable upon a negotiable instrument executed by Habershon on behalf of the firm, for partnership purposes, in the name of John Blurton & Co. Yet it is held that a partner may execute such paper under such circumstances, and sign the individual names of all the partners thereto, and they will be bound thereby. Galaway v. Mathew, 1 Camp. 403. This could hardly be the case if parol evidence was inadmissible to show that a written contract so executed was a firm contract. Besides, I know of no authority making such an application of the parol evidence rule.

My conclusion, therefore, is that the bank had a right to show, if it could, that the joint notes held by it were the firm debts of the bankrupt firm of L. B. Weisenberg & Co. Did it show that said notes were in fact firm debts? There is a difference in the authorities as to whether the joint notes of the members of a firm executed in the strict partnership business for a consideration passing to the firm, nothing else appearing, are to be treated as debts of the individuals, or of the firm. In the following cases they were held to be debts of the individuals, to wit: In re Bucyrus Machine Co., Fed. Cas. No. 2,100; In re Holbrook, Fed. Cas. No. 6,588; In re Herrick, Fed. Cas. No. 6,420; Strause v. Hooper, 5 Am. Bankr. Rep. 225, 105 Fed. 590; In re Jones, 8 Am. Bankr. Rep. 626, 116 Fed. 431. The doctrine of these cases is approved in Collier on Bankruptcy (4th Ed.) 72, and in a note to the case of Strause v. Hooper by the author of that work-possibly, also, by Bump & Loveland in their works on Bankruptcy. Possibly the Holbrook Case is to be distinguished by the fact that the note in that case was signed also by other individuals, not members of the firm, as sureties, and it was the joint and several note of all, and not the joint note of less than all. Possibly, also, the Herrick Case is to be distinguished by same consideration. In the following cases the joint notes were held to be firm debts, on the ground that they were executed in the partnership business, and for a consideration passing to the firm, to wit: In re Warren, Fed. Cas. No. 17,191; In re Thomas, Fed. Cas. No. 13,886; Davis v. Turner, 9 Am. Bankr. Rep. 704, 120 Fed. 605, 56 C. C. A. 669. The same thing has been held in quite a number of state decisions, most of which have been cited by the counsel for the bank. And I think that it may be correctly said that the decided weight of authority is to that effect.

But I do not find it necessary in this case to choose between these contending authorities. There are facts in it which differentiate it from those authorities, and which, in my opinion, require that it should be held that these notes were in fact the debts of the bankrupts Weisenberg and Blanton, and not of the bankrupt Weisenberg & Co. It started out to be a single partnership transaction, but turned out to be two individual transactions. The bankrupt firm applied to the bank for a loan of $25,000. This application the bank, however, declined

to grant. It did so because it considered that, under the laws of this state, it had no right to make the loan. The amount was in excess of what it could loan the said firm, according to its understanding of its powers. It proposed, however, to loan $15,000 to Weisenberg, with Blanton as surety, and $10,000 to Blanton, with Weisenberg as surety, which it considered it had a right to do. This proposal was accepted, and in pursuance thereto the notes in question were executed and discounted. The proceeds of one note was placed to Weisenberg's credit, and that of the other to Blanton's. It is true that thereupon, perhaps immediately, each partner checked the amount to his credit to the firm. But the firm got the money, not from the bank, but from the members of the firm to whom the bank loaned it. No such condition of things as this existed in any of the authorities cited by counsel for the bank. They were all cases where the loan was made to the firm, and the consideration passed directly to it from the lender. The only case which comes any way near to it is the case of Kendrick v. Tarbell, 26 Vt. 416, where the note in question was executed in the names of the individuals composing the firm at the request of the payee. But the loan was made to the firm, and passed to it directly from the payee. Here the notes were not only executed in the names of Weisenberg and Blanton, but the loan, as to one note, was made to Weisenberg, and as to the other to Blanton, and not to the firm, and the proceeds passed from the bank to said members of the firm, and not to the firm. Suppose the individual assets had been greater than the firm assets, instead of the reverse, so as to have made it to the bank's interest to prove the notes against the individuals, and not against the firm. Would it not have proved them against the former assets, and would not the facts above referred to have entitled it so to do? I think so. Besides, there does not seem to be any equity in the bank's position herein, on the ground that its money went towards swelling the firm's assets on hand for distribution. It is shown by the evidence, and seems to be conceded, that nearly the whole of the proceeds were lost in futures. I feel constrained, therefore, to hold that the ruling of the referee as to said notes not being firm liabilities is correct.

Then, as to his refusal to permit Mr. Nicol, the cashier of the bank, to answer the questions as to whom he gave credit for the $25,000, and to whom he looked for payment thereof, which is complained of. I do not think that the referee erred in this particular. The question as to whom credit was given, and from whom payment was expected, could be determined only from the facts of the transaction; i. e., what was said and done before and at the time the notes were executed and discounted. It would not be affected by any testimony of Mr. Nicol as to what his notions in regard to the matter were. The probability is that the main, if not sole, reliance, was placed on the warehouse receipt which was pledged as collateral security, and which is conceded. to be void.

The decision of the referee is affirmed.

In re MOODY.

(District Court, N. D. Iowa, E. D. August 15, 1904.)

No. 394.



A court of bankruptcy has jurisdiction under Bankr. Act July 1, 1898, c. 541, § 2, cl. 3, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3421], to take possession by its marshal or receiver of property in the possession of an adverse claimant, but which is charged in a petition in bankruptcy to have been fraudulently transferred by the alleged bankrupt, where the court finds such action necessary to the preservation of the estate, and, having taken such possession, it has jurisdiction, on reasonable notice to the claimant, to determine the right of ownership, which in such case is one arising in a proceeding in bankruptcy, as distinguished from a controversy at law or in equity, within the meaning of section 23, 30 Stat. 552 [U. S. Comp. St. 1901, p. 3431].

In Bankruptcy. On motion of petitioning creditors for temporary injunction against the Hawkeye Land Company and Myrtle Moody, and motion of said land company for release of property in the custody of the receiver.

May 24, 1904, Charles Kaufman & Bros. and others filed a creditors' petition in bankruptcy against Edward J. Moody, of Hawkeye, Fayette county, alleging that said Moody had committed acts of bankruptcy, for that he had on May 14, 1904, while insolvent, transferred to the Hawkeye Land Company, of said Fayette county, a large part of his personal property, to wit, a stock of merchandise of the value of $7,000, with intent to hinder, delay, and defraud his creditors, and that on the same day, while insolvent, he transferred to his wife, Myrtle Moody, property of the value of more than $5,000, with intent to hinder, delay, and defraud his creditors, and to give her, as one of his creditors, a preference over the others; and they asked that he be adjudged a bankrupt. May 25, 1904, said Charles Kaufman & Bros. filed an ancillary petition in said proceedings, in which they alleged the filing of said creditors' petition, and, further, that on May 14, 1904, said Edward J. Moody, with intent to hinder, delay, and defraud his creditors, without consideration, and while insolvent, attempted to convey to the Hawkeye Land Company, of Fayette county, a large part of his property, consisting of his entire stock of merchandise, all located in his store at Hawkeye, but that after said alleged transfer said Edward J. Moody remained in the open and visible possession of said property, in the same manner that he had been before; that he is now in possession thereof, where he had been and is now doing business; that he is neglecting the business aforesaid, to the great loss of the petitioner and creditors of like class; that it is for the best interest of said estate that some responsible person be appointed to take charge of the property and assets of said Moody until the hearing of the petition, and continue the business of said bankrupt. An injunction against the Hawkeye Land Company is asked, restraining it from transferring or in any manner disposing of or interfering with said stock of goods; also that a receiver be appointed to take possession of the property and assets of said Edward J. Moody pending the hearing of the petition. A certificate of the clerk of this court, stating that the judge was absent from the division of the district in which such petitions were filed, was presented to and filed with the referee in bankruptcy for Fayette county May 26, 1904, together with said ancillary petition, and on that date said referee made an order appointing a receiver to take possession of said stock of goods, which order commanded the receiver to take charge of and hold said estate (being the stock of goods referred to herein), and to continue the business of said bankrupt at Hawkeye until the further order of the court. The receiver duly qualified, took possession of said stock of merchandise on May 26th pursuant to said order,

and has since continued the business of the bankrupt thereunder, and has sold a part of said goods. June 4th an injunction was also asked against Myrtle Moody, wife of Edward J. Moody, restraining her from removing or disposing of the property alleged to have been transferred to her by said Edward J. Moody. Notice of the applications for these injunctions was given to the Hawkeye Land Company and Myrtle Moody, and a time fixed for the hearings thereon, and a temporary restraining order was issued against each, as prayed, pending such hearings. The Hawkeye Land Company has appeared and filed affidavits in opposition to the issuance of an injunction against it, and has also filed a motion to vacate the restraining order, and that the stock of merchandise so taken possession of by the receiver be turned over to it.

Lacy & Brown and Hugh J. Kearns, for petitioning creditors.
Hurd, Lenehan & Kiesel, for Hawkeye Land Co.

REED, District Judge (after stating the facts). The Hawkeye Land Company claims to be a good-faith purchaser of this stock of merchandise from Edward J. Moody, that it was in actual possession thereof as such prior to the filing of the petition in bankruptcy, and that the court of bankruptcy therefore had no jurisdiction to summarily take possession of such property from it. The affidavits filed by the land company tend to show that on May 14, 1904, it purchased this stock of merchandise in good faith from the alleged bankrupt, without notice of his insolvency, paid therefor $400 in cash, paid a note of Moody's to the First State Bank of Hawkeye for $100, gave its own note for $1,000 and a quarter section of land in Fayette county, took actual possession of said goods on that day, and a written bill of sale of the same, which it duly recorded, and was in the open and exclusive possession of said property at the time the receiver was appointed; that Moody was employed by it as a clerk after it purchased the stock of goods, and that he was acting in that capacity only when the receiver was appointed; that the petitioning creditors and the receiver all knew of such purchase by and possession of the land company when the receiver was appointed, but he took the same from its custody, against its protest, and without its consent.

The examination by the petitioning creditors of some of the affiants whose affidavits were so presented by the land company tends to show that the land so conveyed by that company in part payment for the stock of goods was subject to a mortgage for $6,000, and was deeded to Myrtle Moody, wife of Edward J. Moody; that the $1,000 note was made payable to her, or delivered to her at the time of the transaction; that one of the members of the land company is an officer of the First State Bank of Hawkeye; that Moody remained in the store after the sale of the goods to the land company, carried the keys thereto, and continued to sell the goods as he had been selling them before said sale; that he was to have a percentage of the daily sales of goods for his salary, and that the proceeds of such sales above this were to be applied upon the note for $1,000 which the land company gave as part payment for the stock of merchandise; and the petitioning creditors claim that the transaction between Moody and the land company was intended by both of said parties as a fraud upon the creditors of Moody, and that the land company is not, therefore, a good-faith purchaser of said property. Counsel for the land company cite and rely upon In

re Rockwood (D. C.) 91 Fed. 363; Bernheimer v. Bryan, 93 Fed. 767, 35 C. C. A. 592; Beach v. Macon Grocery Co., 116 Fed. 143, 53 C. C. A. 463, and other similar cases. In the first of these it was ruled by Judge Shiras that the marshal or a receiver should not be appointed, under section 69 of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 565 [U. S. Comp. St. 1901, p. 3450], to take possession of property from a third person who was in actual possession thereof under claim of right prior to the institution of bankruptcy proceedings. In general, the rule so announced should be followed, and should be observed by referees acting under authority of section 38 (3), 30 Stat. 555 [U. S. Comp. St. 1901, p. 3435], in appointing receivers. In Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175, in speaking of the powers conferred upon courts of bankruptcy by sections 2 (3) and 69 of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 545, 565 [U. S. Comp. St. 1901, pp. 3421, 3450], it is said, "These provisions can hardly be considered as authorizing the forcible seizure of such property in the possession of an adverse claimant." These rulings, however, were made prior to the decision of the Supreme Court in Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814, hereinafter referred to, and they must yield to that decision; and whether or not the marshal or a receiver should be directed to take possession of property in the hands of third parties will depend upon the circumstances of the particular case. Bernheimer v. Bryan and Beach v. Macon Grocery Company are authority for the contention of the land company that, if it was in fact in possession of the property at the time the receiver took possession thereof, the court of bankruptcy would be without jurisdiction to summarily take the property from it, and it should be returned to the land company, and the right to the property determined in an action therefor by the trustee in the event that Moody should be adjudged bankrupt. But these decisions upon this point are overruled by the Supreme Court in Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814. In this case the Supreme Court held that a court of bankruptcy has authority under section 2 (3) of the bankruptcy act of July 1, 1898, c. 541, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3421], after the adjudication of bankruptcy, to order the marshal or receiver to take possession of the property of the bankrupt from a third party who acquired such possession and the alleged right thereto from the bankrupt, or one holding his title and right only, after the filing of the petition, and before the adjudication of bankruptcy. It is contended by the land company that this should only be done after the adjudication, for until that time it cannot be known that the court of bankruptcy will have authority to make distribution of the property. In Re Rochford, 124 Fed. 182 (C. C. A., Eighth Circuit), the property appears to have been in the possession of one who claimed. to own and to have acquired it from the bankrupt a month before the petition in bankruptcy was filed; and it is there held that the bankruptcy court had authority to order the receiver to take possession thereof after the filing of such petition, and before the adjudication. Davis v. Bohle, 92 Fed. 325, 34 C. C. A. 372 (Eighth Circuit), is to the same effect.

« ForrigeFortsett »