Opinion of the Court.

276 U.S.

5

ments, attachments, or other liens, obtained through legal proceedings against a person who is insolvent, at any time within four months prior to the filing of a petition in bankruptcy against him, shall be deemed null and void in case he is adjudged a bankrupt, and the property affected by the . . lien shall be deemed wholly discharged and released from the same, and shall pass to the trustee as a part of the estate of the bankrupt . . ."

It is indisputable that under these provisions the judgment liens upon the real estate of the Beckers cannot be annulled unless they were adjudged bankrupts under petitions in bankruptcy filed within four months after the suit against them was commenced, § 67c, or the judgment liens obtained, § 67f. This being unquestioned, the trustee does not claim that the liens were annulled under the voluntary petitions of the Beckers which were filed after the expiration of the prescribed periods. His sole contention is that they were annulled by the proceedings under the involuntary petition filed against the Provision Company within such periods. As to this he insists that although the petition was filed against the partnership alone and the partnership alone was adjudged a bankrupt the petition was, in effect, a petition against the individual partners, as well as the partnership, and the adjudication was, in effect, an adjudication that the individual partners as well as the partnership were bankrupts; that is, that the adjudication that the partnership was a bankrupt necessarily imported an adjudication that the individual partners were also bankrupts.

This contention disregards entirely the principle established by the Bankruptcy Act that a partnership may be adjudged a bankrupt as a separate entity without refer

5 The phrase "A person against whom a petition has been filed" as defined by § 1 (1) of the Bankruptcy Act, includes " a person who has filed a voluntary petition."

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Opinion of the Court.

ence to the bankruptcy of the partners as individuals. In this respect the Act makes a complete change from the earlier Bankrupt Law of 1867, which did not permit the partnership entity to be adjudged a bankrupt, but merely provided that when two or more persons who were partners in trade were adjudged bankrupt, the property of the partnership, as well as that of the partners, should be taken over by the bankruptcy court for administration. The present Act not only omits this provision of the Law of 1867, but-after providing generally that the word " persons when used in the Act shall include "partnerships," § 1 (19), and that a petition in bankruptcy may be filed against a person " who is insolvent and has committed an act of bankruptcy, § 3 (b)-specifically declares in § 5a that: "A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt." Under this provision, as was

7

614 Stat. 517, c. 176, § 36; R. S. § 5121.

7 Sec. 5 of the present Act, which was substituted for § 36 of the Law of 1867, reads as follows:

"Sec. 5. PARTNERS-a A partnership, during the continuation of the partnership business, or after its dissolution and before the final settlement thereof, may be adjudged a bankrupt.

"b The creditors of the partnership shall appoint the trustee; in other respects so far as possible the estate shall be administered as herein provided for other estates.

"c The court of bankruptcy which has jurisdiction of one of the partners may have jurisdiction of all the partners and of the administration of the partnership and individual property.

"d The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners. " The expenses shall be paid from the partnership property and the individual property in such proportions as the court shall determine.

"f The net proceeds of the partnership property shall be appropriated to the payment of the partnership debts, and the net proceeds

said in Meek v. Centre County Banking Co., 268 U. S. 426, 431, there can be no doubt that a partnership may be adjudged a bankrupt as a distinct legal entity." And if proceeded against as a distinct legal entity, without reference to the individual partners, it may, as such, under § 12a, offer terms of composition to the partnership creditors alone. Myers v. Internat. Trust Co., 273 U. S. 380, 383.

It has long been the established rule in the Circuit Courts of Appeals and District Courts that under § 5a of the Act a partnership may be adjudged a bankrupt as a separate entity, under a voluntary or involuntary petition, irrespective of any adjudication of bankruptcy against the individual partners. In re Meyer (C. C. A.), 98 Fed. 976, 979, affirming Chemical National Bank v. Meyer (D. C.), 92 Fed. 896, 901; In re Mercur (C. C. A.), 122 Fed. 384, 387, affirming In re Mercur (D. C.), 116

of the individual estate of each partner to the payment of his individual debts. Should any surplus remain of the property of any partner after paying his individual debts, such surplus shall be added to the partnership assets and be applied to the payment of the partnership debts. Should any surplus of the partnership property remain after paying the partnership debts, such surplus shall be added to the assets of the individual partners in the proportion of their respective interests in the partnership.

"g The court may permit the proof of the claim of the partnership estate against the individual estates, and vice versa, and may marshal the assets of the partnership estate and individual estates so as to prevent preferences and secure the equitable distribution of the property of the several estates.

"h 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 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."

Fed. 655, 658; In re Stein & Co. (C. C. A.), 127 Fed. 547, 549; Dickas v. Barnes (C. C. A.), 140 Fed. 849, 851; In re Bertenshaw (C. C. A.), 157 Fed. 363, 368; Mills v. Fisher & Co. (C. C. A.), 159 Fed. 897, 899; Francis v. McNeal (C. C. A.), 186 Fed. 481, 483; In re Samuels (C. C. A.), 215 Fed. 845, 847; Armstrong v. Fisher (C. C. A.), 224 Fed. 97, 99; Carter v. Whisler (C. C. A.), 275 Fed. 743, 746; In re Dunnigan (D. C.), 95 Fed. 428, 429; In re Duguid (D. C.), 100 Fed. 274, 278; In re Barden (D. C.), 101 Fed. 553, 555; Strause v. Hooper (D. C.), 105 Fed. 590, 592; In re Stokes (D. C.), 106 Fed. 312, 313; In re Hale (D. C.), 107 Fed. 432, 433; In re Farley (D. C.), 115 Fed. 359, 360; In re Pincus (D. C.), 147 Fed. 621, 625; In re Solomon & Carvel (D. C.), 163 Fed. 140, 141; In re Everybody's G. & M. Market (D. C.), 173 Fed. 492, 493; In re Lattimer (D. C.), 174 Fed. 824, 826; In re Perlhefter (D. C.), 177 Fed. 299, 305; In re LenoirCross & Co. (D. C.), 226 Fed. 227, 229. This rule has been applied not only where the petition in bankruptcy sought merely the adjudication of the partnership as a bankrupt, but where the adjudication of the individual partners was also sought. Thus in some cases the partnership was adjudged a bankrupt, although the court refused to adjudge the bankruptcy of the individual partners, either because they had not committed individual acts of bankruptcy, or because, being wage earners or tillers of the soil, they were exempt from

8

And even in Re Forbes (D. C.), 128 Fed. 137, 139, in which the District Court for Massachusetts held that there could be no bankruptcy of a partnership without the bankruptcy of all the partners, it was recognized that this would not apply in "exceptional cases such as In re Dunnigan (D. C.), 95 Fed. 428," supra, in which it had been held, in the same district, that a partnership might be. adjudged a bankrupt although one partner, being a minor, could not be so adjudged.

Opinion of the Court.

276 U.S.

involuntary bankruptcy, or because they were insane, or minors."

This rule, often announced, is based upon the plain words of the Bankruptcy Act. The specific provision in § 5a that a partnership-a person within the meaning of the Act-" may be adjudged a bankrupt," distinctly implies that it may be adjudged a bankrupt as a separate entity without reference to the bankruptcy of the individual partners. This implication is strengthened by the fact that there is no requirement in § 5 that the partners shall be joined as defendants in a petition filed against the partnership, and no provision that the partners shall be adjudged to be bankrupts under such a petition or that such individual adjudications shall be a prerequisite to the adjudication of the bankruptcy of the partnership; as well as by the fact that while § 5 of the Act incorporated most of the administrative provisions in the corresponding section of the Bankrupt Law of 1867, it omitted the provision for granting discharges to the individual partners. That is, the adjudication of the bankruptcy of the individual partners was left solely to the general provisions of the Act, under which no person could be adjudged a bankrupt in involuntary bankruptcy unless he was not only insolvent but had committed an act of bankruptcy, and not even then if he were a wage earner or tiller of the soil, § 3a, b; § 4b.

We cannot believe that Congress intended to limit and weaken the broad provision of § 5a permitting a partnership to be adjudged a bankrupt, by making it essential to

• Neither of two incidental questions upon which the lower federal courts have differed in opinion-whether a partnership can be deemed insolvent as an entity when the individual partners are solvent, and whether a bankruptcy court which has adjudged a partnership a bankrupt may take possession of the individual property of a partner who has not been adjudged a bankrupt so far as is necessary to pay the partnership debts-is here involved.