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Whether or not a partnership relationship exists is determinable by the intent of the parties to do things which constitute a partnership.
The creditors entered into a contract with the debtors. The creditors sought to collect from the debtors the total amount of the debtors' dishonored checks in an involuntary bankruptcy petition. The district court adjudged bankrupt the debtors and a partnership combination consisting of both the creditors and the debtors, based on their contract. The district court disallowed certain claims. The creditors appealed.
Did a partnership relationship exist between the creditors and the debtors?
The court reversed in part and affirmed in part. The court held that a partnership combination existed between the creditors and the debtors based on their contract. However, it was beyond the district court's power to adjudge as bankrupt the partnership combination not named in the involuntary petition. There was no evidence that the creditors were insolvent. Thus, the partnership combination created by the written agreements between the creditors and the debtors could not be adjudged insolvent or bankrupt under 11 U.S.C.S. § 21(q)(2), (q)(3). The court upheld the disallowance of certain claims because the creditors had no collectible claim for capital contributed until all partnership creditors and the expenses of administration were paid in full.