Opinion of the Court-Hoffman, J. obtain them by giving bond for their full market value-or, in other words, by securing the repayment in case of condemnation of the value he receives when the goods are delivered to him. On what ground should the importer, who has made a warehouse entry, be put in a better position? He also asks for and receives property which he can at once convert into money, and for which he can obtain by sales the sum he is required to pay in case of condemnation. The goods are worth that sum to the government, and what right has he to ask the government to surrender them without receiving a bond for their full value? I confess, that after the fullest consideration, I have been able to discover nothing, either in the warehouse laws or the provisions of the eighty-ninth section of the act of 1799, which can give any color to sucli a pretension. I regret exceedingly to be obliged to dissent from any opinion entertained by the distinguished judge of the southern district of New York, especially when it is sustained by that of his eminent predecessor. But I cannot avoid announcing the conclusions which, after the best consideration I can give the subject, I have reached. My belief in their correctness is strengthened by the fact that they seem to be in accordance with the views entertained by the learned judge of the Pennsylvania district, whose decision, which I have not had the advantage of seeing, is referred to in the opinion of the district judge of the southern district of New York. An order must be entered directing the goods seized to be delivered to the claimant, on his executing a bond for their appraised value, without deducting the duties, and on the production of the collector's certificate that the duties have been paid. Opinion of the Court-Hoffman, J. IN RE ISAACS. DISTRICT COURT, DISTRICT OF CALIFORNIA. 1. BANKRUPTCY-JOINT CREDITORS.-An agreement between two traders to unite their stocks in trade as the capital of a partnership to be formed between them, and to convert the separate business debts of either into joint debts of the firm, will not entitle a separate creditor who has not acceded in any way to the arrangement before bankruptcy, to prove his claim as a joint creditor of the firm against the partnership estate. Before HOFFMAN, J. W. W. Cope, for petitioning creditor. HOFFMAN, J. It appears by the statement of facts reported by the register and admitted by the attorneys for the respective parties, that on the seventh of March, 1871, the above bankrupts, by a writing under seal, entered into a contract of partnership, by which it was agreed that the parties who had previously been doing business on their individual accounts should unite their stocks of goods and uncollected book accounts, to form a joint capital for the partnership, and that the copartnership should assume and become liable for all the separate business debts of either partner, as shown by his books. The firm having become bankrupt after incurring partnership debts, a creditor of one of the partners (and who appeared by the books of the latter to have been such), for goods sold before the formation of the partnership, offered to prove his debt as a joint debt, with a view of sharing in the distribution of the firm assets. No evidence was offered to show that the separate creditor acceded to the substitution of the firm liability for that of the partner by whom the debt was contracted. He does not even appear to have been aware of the terms and conditions of the agreement between the partners. The register was of opinion that the proof offered should Opinion of the Court--Hoffman, J. not be received; and the question having been fully argued, is submitted to the court for its decision. The question thus presented, viz., whether an agreement between two traders to unite their stocks in trade as the capital of a partnership to be formed between them, and to convert the separate business debts of either into joint debts of the firm, will entitle a separate creditor who has not acceded in any way to the arrangement to prove in bankruptcy as a joint debtor of the firm, is closely analogous to that which arises where, on the dissolution of a firm, the continuing partner takes an assignment of the joint assets, and agrees to be responsible for the firm debts; and after bankruptcy, a joint creditor who has not, before bankruptcy, assented to the conversion of his debt, seeks to prove it against the separate estate of the continuing partner. Both of these questions have frequently been submitted to the courts, and have received, with one or two exceptions, a uniform answer. A joint debt may be converted into a separate debt, or a separate debt into a joint debt, either with or without an extinguishment of the original obligation. In the former case the creditor can only rely on his debt according to its new quality, and is, therefore, entitled to only one mode of proof. In the latter case, as the old debt still subsists, he can take advantage of it in either its old or its new form, and is consequently entitled to an election of proof. (Story on Part. 369; Collyer on Part. 767.) As no arrangement between a debtor or debtors and third person, or between themselves, can impair or destroy the liability of either or all of them to a creditor, without his consent, it is evident that to establish an extinguishment of the old debt, it must appear that he has accepted the new liability as a substitute for and in discharge of the old. But when a conversion merely is set up, i.e., the creation of a new liability, without an extinguishment of the old, as this is ordinarily beneficial to the creditor, less evidence of an assent by him to the arrangement will be sufficient than in cases where it is sought to substitute a separate for a joint Opinion of the Court--Hoffman, J. liability. (Robson's Law of Bankruptcy, 599, and cases cited.) But even where a mere conversion is set up, as in this case, evidence of the assent of the creditor before bankruptcy seems always to be required. In the case of Ex parte Williams (1 Buck's Bankruptcy Cases, 13), a trader indebted entered into a partnership and brought his stock in trade into the new firm, under articles by which the joint trade was to pay his creditors named in a schedule. It was held that a separate creditor named in the schedule did not by the articles become a joint creditor of the firm. In this case Lord Eldon says: "If it is meant to be said on the part of the petitioner, that a joint action might have been maintained by the creditors named in the schedule, against the partners immediately on the execution of the deed, and by force of the deed only, independently of an accession to the agreement on the part of the creditors named in the schedule, I cannot assent to the doctrine. * * * But I agree to the proposition that a very little will do to make out an assent to the agreement." The same point was decided by Sir John Leach in Ex parte Freeman, Id. 471, though the question there arose in a case where a retiring partner had assigned the stock in trade to a continuing partner, who covenanted to pay the joint debts. The partners having become bankrupts, it was held that the joint creditors, not having, previously to the bankruptcy, accepted the continuing partner as their sole debtor, could not prove against the separate estate of the continuing partner. This case, although it was overruled by Lord Eldon, seems, nevertheless, observes Mr. Collyer, to be consistent with the most of those on the same subject which preceded it, and as the grounds of Lord Eldon's decision do not appear, and as Sir John Leach decided the subsequent case of Ex parte Fry, 1 Glyn. & Jan. 96, in the same manner, there seems just reason to suppose that the case of Ex parte Freeman was rightly decided. (Collyer on Part. 774.) In Ex parte Lane, 1 De Gex, 300, it was held that a Opinion of the Court-Hoffman, J. parol agreement to convert a separate debt into a joint debt is not within the statute of frauds if the former debt is extinguished, but an assent on the part of the creditor must be shown. The case of Ex parte Appleby, 2 Deac. 482, decided in 1839, was nearly identical with Ex parte Freeman; and 'it was held that a joint creditor could not prove against the separate estate of a continuing partner who had taken an assignment from the retiring partner of the joint assets, and agreed to indemnify against the partnership debts; there being no satisfactory evidence that there was no joint estate, nor that the joint creditor had accepted the continuing partner as his separate debtor. So in Kirwan v. Kirwan, 1 Tyrwhett, 491, it was decided that mere knowledge of the dissolution of a partnership is not sufficient, although an account is continued with the new firm. The creditor must appear to have expressly, or by some act, accepted the substituted credit of the new partnership instead of the retiring partners. Ex parte Parker, 2 Mont, Deac. & De Gex, 511, was a case where a trader, indebted to a lunatic in the amount of the purchase-money of a business and the machinery and stock-in-trade, entered into a partnership under an agreement by which the stock-in-trade and property of the business were to belong to the firm, which was to assume the liabilities of the sole business. The firm tendered an annual account in its own name, in respect to the debt, to the committee of the lunatic, who made no objection to this form of account. It was held, on the firm becoming bankrupt, that the committee was not entitled to prove against the joint estate. It was even doubted whether the committee had power, and whether the Lord Chancellor could have given him power to convert the separate into a joint liability. It will be observed that this case is much stronger than the case at bar. The debt was for the purchase-money of the property transferred to the firm. The creditor was a lunatic, incapable of personally assenting to the conversion, |