George Barclay & others vs. George H. Phelps; Jonathan Goodhue & others vs. The Same, 4 Met. 397

Shaw, C. J. The facts, briefly stated, are these : Phelps, the insolvent, had been a member of the firm of Phelps & Hill, and during the existence of that partnership, they had indorsed four notes of Field, for his accommodation, which were received by the appellants, respectively, and which they claimed a right to prove, under this proceeding, as a debt due from Phelps. Can they be so proved ? There is no question made that these notes constitute a valid claim against Phelps & Hill, whose partnership was dissolved before Phelps applied for the benefit of the insolvent act.

We must presume, that though indorsed by Phelps & Hill for the accommodation of Field, yet that they were taken in due course of business by the appellants ; that they were dishonored on due presentment to the promisor, and that seasonable notice thereof was given to the indorsers. The court are of opinion that these notes ought to have been admitted to proof, and a separate account kept of such debts as the insolvent owed alone, and of such debts as he owed jointly with Hill, as a member of the firm of Phelps & Hill, or with Field, as a member of the firm of Phelps & Field.

A separate account of all funds, if any, which the assignee may receive of either of these firms, should be also keot. It is quite a different question, whether the creditors of Phelps Si Hill, or Phelps & Field, can come into competition with the separate creditors of Phelps, in a dividend of the separate property of Phelps. But after the separate creditors are fully paid, there may be a surplus ; and to that surplus the joint creditors would be entitled, before any claim could be made by Phelps himself, the debtor. This is a sufficient reason why the appel lants should be allowed to prove their claims.

The case is within the reason,, if not within the letter, of the provisions of the insolvent law, where the insolvent is in partnership. St. 1838, c. 163, § 21. The only difference is, that the statute applies literally to a case where the insolvent is in partnership, at the time of his becoming insolvent. There the operation of the insolvent proceedings extends to the partnership dealings, and binds the partnership property.

But where the partnership is dissolved, the provisions of the statute cannot apply to the partnership literally; but so far as the rules of proceeding are applicable, they may properly be applied to analogous cases.

This rule is strengthened by the consideration, that if this, which is an acknowledged debt of Phelps, could not be proved under this commission, the claimants would lose all claim resting upon the separate property or separate responsibility of Phelps ; inasmuch as the discharge extends to all his debts, joint as well as several, with a saving clause, not discharging the responsibility of any partner or joint debtor. St. 1838, c. 163, § 7.

It is therefore ordered, that a certificate be sent to the judge of probate, requiring him to admit the appellants to prove any debt due to them by the said Phelps, jointly with the said Hill; that a separate account be kept, distinguishing the separate debts of said Phelps, from such joint debts, if any are proved ; and that the proceedings, with such certificate, be remitted to the judge of probate for further proceedings.