A supplier to a general partnership has no administrative claim against a general partner for goods delivered to the partnership within 20 days of the partner’s bankruptcy, according to Chief Bankruptcy Judge Jason D. Woodward of Aberdeen, Miss.
Under prior law, the supplier had a good case because the Mississippi Supreme Court had held in 1932 that general partners and general partnerships are not distinct legal entities and that partnership property is owned by the partners, not the partnership.
The facts were undisputed. A father and son were general partners in a farm supply business. A supplier sold and delivered goods to the partnership within 20 days of the father’s chapter 12 filing. For the goods, the supplier claimed an administrative priority against the father under Section 503(b)(9).
That section allows an administrative claim for goods “received by the debtor within 20 days before the” debtor’s bankruptcy filing on account of goods that “have been sold to the debtor.”
With the adoption of the Uniform Commercial Code and the Uniform Partnership Law, Mississippi law changed, Judge Woodward said in his Nov. 1 opinion.
Now, he said, a partnership interest is the only partnership property in the estate of a bankrupt partner.
Since the partnership and the partner are now considered separate legal entities in Mississippi, the supplier was not entitled to an administrative claim because the goods were sold to the partnership, not to the partner, Judge Woodward held.
The supplier did not walk away empty-handed, however; Judge Woodward gave the supplier an allowed general unsecured claim in the father’s chapter 12 case.