James Pott & Co. v. Schmucker

Citations

• 84 Md. 535
• 36 A. 592
• 1897 Md. LEXIS 17

Syllabus

<p>Partnership—Separate Business Carried on by One Partner Under a Corporate Organization—Indebtedness of the Partner to the Firm—Rights of Individual Creditors of an Insolvent Partner and the Trustee in Insolvency of the Firm—One Man Corporation— Control of Firm's Business by One Partner—Acceptance of Deposits by Insolvent Bankers—Fraud—Affirmance of Contract.</p> <p>Where one of the members of a partnership engages in a separate business of his own, becoming in this business a debtor to the firm, then, upon the insolvency of such partner, the firm of which he is a member is not entitled to share equally with his individual creditors in the distribution of the assets of such separate business.</p> <p>If, in such case, the firm of which the insolvent debtor is a member were allowed to compete with that debtor’s individual creditors in the distribution of his assets, would, to the extent of his interest in the firm, be competing with his own creditors.</p> <p>When in such case the firm also becomes insolvent, its trustee, whether a conventional trustee or one appointed in insolvency, has no greater rights against the individual assets of the insolvent partner than the firm itself would have had.</p> <p>There are two cases in which the creditor firm of which an insolvent is a member may prove in competition with his individual creditors : i. Where money has been fraudulently abstracted from one estate and applied for the benefit of the other. 2. Where some of the members of a partnership form a distinct body for carrying on a distinct trade and the articles of one trade have been furnished by one firm to the other.</p> <p>In certain cases a debtor corporation and the person who owns all ol its capital stock may be treated as identical.</p> <p>When a member of a firm conducts a separate business venture of his own under a corporate organization, of whose stock and property he is the sole owner, and such corporation becomes indebted to the firm, then upon the insolvency