Estate of Levin Brothers

On the previous submission of this case in Bank an opinion was prepared by the late Justice Temple, signed by a requisite number of concurring justices, and filed. It appearing, however, that such opinion was not signed by the requisite number of justices who had heard the oral argument in the case, and no stipulation having been entered into that any of the justices not hearing such oral argument might participate in the decision, and the attention of the court having been directed to that fact, the opinion so filed was withdrawn. That opinion was as follows: — "The above-named firm, composed of Isidor Levin, Julius Levin, and David Levin, were adjudged insolvents, January 7, 1897, as were also the individual members of the firm. It does not appear that there were any individual creditors. "The Anglo-Californian Bank, appellant here, holds a mortgage to secure its indebtedness upon the homestead of Isidor Levin, one of the copartners. Appellant's allowed claim amounts to $33,500, and the value of the homestead is $6,000. The homestead is the individual property of Isidor Levin, and was his domicile, but was set apart as a homestead in the proceedings in insolvency, not…

Voluntary proceedings in insolvency were commenced herein on January 7, 1897, and said firm and the individual members thereof adjudged to be insolvent. Prior thereto, — to-wit, April 20, 1893, — the Anglo-Californian Bank, Limited, procured from Isidor Levin and his wife, to secure to it the payment of all sums due or to become due from said Levin Brothers, a mortgage on a piece of property owned by said Isidor Levin, individually, and occupied by him and his wife as a domicile; but no declaration of homestead had been filed prior to the commencement of the proceedings in insolvency. Under section 64 of the Insolvent Law of 1895, the court in such insolvency proceeding, on March 24, 1897, set apart to said Isidor Levin the property so mortgaged, as a homestead. The said mortgage which was so held by said bank is of the value of six thousand dollars, and in the settlement of the final account of the assignee in said insolvency proceedings the court below held that the amount of said mortgage security should be deducted from the claim of said bank. From this portion of the order settling the said final account the bank appeals. The mortgage held by the appellant was not…

I concur in the opinion prepared by the late Mr. Justice Temple while he was a member of this court. I add some observations which, to my mind, make the conclusion clearer and more satisfactory. It is correctly stated in the opinions above referred to that in insolvency or bankruptcy proceedings a partnership creditor who has security upon the separate property of one member of the firm which has been transferred to a third person, or security on property still owned by one of the firm, is not required to make a deduction, but may prove his whole claim against the partnership assets. In the case of security on the property of a third person, or upon property which has been transferred to a third person, the reason for this rule is, that unsecured partnership creditors suffer no loss by this method of marshaling the assets. For, if the third person were compelled to pay the secured debt to the value of the property mortgaged, he would be to that extent a creditor of the partnership, and could prove his claim and participate in the distribution. And before payment he would be in the position of a surety for the partnership, and as such could have the claim proved and allowed as a…

I am not able to concur in the judgment. I think that under the provisions of our Insolvent Law the value of appellant's mortgage was properly deducted from its claim for dividends. In my opinion, where several persons acting together as partners commence voluntary proceedings in insolvency, each of them is a "debtor" within the meaning of section 48 of the statute, and that, within its meaning, property mortgaged by either to secure partnership debts is "property of the debtor." In case of persons who are partners applying for a discharge in insolvency, who are the petitioners, and who are the debtors? Clearly the natural persons who are associated as partners. A partnership is really not a legal entity. It is not a "person"; and the use of the partnership name is of no value except as it represents natural persons. This is recognized by the Insolvent Law; for its provision on the subject is, that "two or more persons who are partners . . . . may be adjudicated insolvent," either upon their own petition or upon that of creditors (Stats. 1895, p. 144, sec. 39); and the section further provides that all the joint property "and also all of the separate property of each of the…