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February 26, 1940

In re MESSENGER et al.

The opinion of the court was delivered by: KALODNER

The bankruptcy referee dismissed a reclamation petition filed by Earl E. Crowley. Crowley thereupon filed a petition for review of the referee's decree.

The record discloses the following fact situation:

 In December, 1938, Crowley was the manager of the Rydal Golf Club, Rydal, Pennsylvania. Frank V. Messenger and Harry T. Miller, individually and trading as M. & M., a partnership, were then engaged in the plumbing business. Messenger and Crowley had known one another for five or six years. According to Crowley's contention, Messenger attempted to borrow some money from him in the latter part of December, 1938. He testified that he declined to make the loan. He did, however, at that time "arrange" to buy a Chevrolet truck belonging to the partnership for a price of $225, and made a cash payment of $50 on account. Messenger retained possession of the truck until January 21, 1939, at which time, in accordance with Crowley's instructions, he delivered the truck to a repair shop designated by Crowley in order that certain repairs might be made. At that time Crowley obtained from Messenger the partnership certificate of title to the truck; had the title transferred; placed insurance on the truck in his own name; the repair order was entered in the name of Crowley.

 While the truck was at the repair shop, the creditors of Messenger and Miller, having issued a writ of execution against the partnership on January 14, 1939, the sheriff of Philadelphia County, in pursuance of the execution process, on January 25, 1939, seized the truck at the repair shop and took it into his possession.

 On January 26, 1939, the day after the truck had been seized and removed by the sheriff, Crowley delivered to Messenger his check for $175, drawn to the individual order of Messenger for the balance of the $225 purchase price. The $175 check was post-dated February 7, 1939. Crowley admitted that he knew on February 2, 1939, of the sheriff's levy, and that he filed no property claim with the sheriff.

 On February 6, 1939, Messenger and Miller were adjudicated bankrupts. On February 7, 1939, Messenger cashed the $175 check which had been given to him by Crowley on January 26, there having been no stoppage of payment by Crowley.

 The truck was subsequently sold at public sale by the trustee in bankruptcy for the net sum of $330. It was stipulated by the parties that the proceeds of the sale stand in lieu of the truck in the event that the reclamation petition was successful.

 It is admitted that Crowley knew at the time he bought the truck that it was partnership property. It is admitted, too, that he never discussed the purchase of the truck with the partner, Miller.

 The master dismissed the reclamation petition on the ground that, assuming that there was a sale and not merely a pledge of the truck as security for the December, 1938, cash loan of $50, that Crowley's acquisition of the truck, with full knowledge at the time that the truck was partnership property, and without any consultation whatever with Messenger's co-partner Miller, was not binding upon Miller nor upon the execution creditors of the partnership, under the provisions of the Pennsylvania Uniform Partnership Act of March 26, 1915, P.L. 18, § 9, 59 P.S. Pa. § 31, and was also not binding upon the trustee in bankruptcy under Section 70, sub. c, of the Bankruptcy Act, 11 U.S.C.A. § 110, sub. c.

 The master also found that, assuming that there was a sale, that such sale was a transfer void as against the partnership creditors and the trustee in bankruptcy, under the provisions of Sections 5, 7, 8, and 9 of the Pennsylvania Fraudulent Conveyances Act of May 21, 1921, P.L. 1045 -- 39 P.S. Pa. §§ 355, 357, 358, 359 and Section 70, sub. c, of the Bankruptcy Act.

 I am in accord with the master's findings that the sale was in violation of the Pennsylvania Uniform Partnership Act and the Pennsylvania Fraudulent Conveyances Act, above cited.

 The relevant provisions of Section 9 of the Pennsylvania Uniform Partnership Act are:

 "(1) Every partner is an agent of the partnership for the purposes of its business, and the act of every partner, * * * for apparently carrying on in the usual way the business of the partnership of which he is a member, binds the partnership * * *.

 "(2) An act of a partner which is not apparently for the carrying on of the business * * * in the usual way, does not bind the partnership unless authorized by the other partners."

 Section 9 of the Uniform Partnership Act generally is recognized as restricting the power of a partner to dispose of capital assets which are not the stock in trade of a mercantile partnership.

 "A partner has no implied power to sell property of the firm not held for sale, for example, the real estate on which the business is conducted, the furnishings of an office, or the farming implements of an agricultural partnership. Such a sale would not be in the ordinary course of business." Crane & Magruder, Cases on Partnership (1924) p. 261, n. 34.

 "Each partner has ordinarily implied authority, resulting from the very nature of the case, to sell, assign or dispose of, in the regular course of business, so much of the partnership personalty as is kept for ...

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