§ 203. Whether liability of surety on appeal bond is dependent upon his right to plead discharge of the principal in the appellate court. It has been said that the liability of the surety on the appeal bond should depend upon whether the discharge of the principal may be pleaded in the appellate court,27 but the modern cases seem to make very little of this distinction, for, although the appellate court is limited to matters contained in the record, it will entertain a suggestion of the death of one of the parties to the appeal and, similarly, a suggestion of bankruptcy proceedings will also usually be entertained by the appellate courts.28 But, no matter what the rule would be in the case of appeals from judgments, the liens of which are not affected by the taking of the appeal, where the trial is a trial de novo, as is usually the case in an appeal from a justice's court, the discharge in bankruptcy of the appellant may always be pleaded.29 § 204. Sureties on appeals from judgments which are not provable debts, as against the principal's estate in bankruptcy. It must also be borne in mind that not every judgment is a 27 Collier on Bankruptcy (1921, 12th Ed.) p. 420. 28 In Lafoon v. Kerner (1905) 138 N. C. 281, 50 S. E. 654, 656, it was said: "In this state the practice has been different. In a pending action upon a dischargeable debt, the defendant is permitted to plead his discharge since the last continuance, and, unless cause is shown to the contrary, the action is dismissed. State v. Bethune, 30 N. C. 139; Knabe v. Hayes, 71 N. C. 109; Blum v. Ellis, 73 N. C. 293; Withers v. Stinson, 79 N. C. 341." See Boyd V. Agricultural Ins. Co. (1904) 20 Colo. App. 28, 76 Pac. 986. In Kentucky the Code apparently does not allow the pleading of a discharge in bankruptcy in the appellate courts. See obiter, Slusher v. Hopkins (1906) 124 Ky. 44, 97 S. W. 1128. The court said in Chewning v. Knight (1918) 16 Ala. App. 357, 77 So. 969, that: "The fact of the discharge in bankruptcy of the principal obligor on the appeal bond was not in and of itself a bar to this action, unless the discharge was successfully pleaded in the suit between Bass and Chewning in which the bond was given, thereby preventing the recovery of a personal judgment against Bass in the successful prosecution of his appeal. Young & Co. v. Howe et al., 150 Ala. 157, 43 So. 488.'' In Massachusetts a "suggestion'' of bankruptcy is not enough. Berry Clothing Co., Inc. Shopnick (1924) 249 Mass. 459, 144 N. E. 392. V. 29 House v. Schnadig (1908) 235 Ill. 301, 85 N. E. 395. provable debt, even though obtained prior to the filing of the petition in bankruptcy. Thus, for example, judgments by way of penal fines or for alimony are not provable in bankruptcy,30 and, not being provable, are not dischargeable, so that the surety on a bond in an appeal from such a judgment would not be released by the principal's discharge in bankruptcy, because the principal himself cannot escape liability on such a judgment by obtaining a discharge in bankruptcy. If the judgment falls within any of the six classes of nondischargeable debts contained in section 17 of the Bankruptcy Act, then the surety's liability would not be affected. Thus, it is submitted that, a judgment for a franchise tax due a state being non-dischargeable, the surety on a bond given in an appeal from such judgment would clearly still be liable, even though his principal had received a discharge in bankruptcy after the entry of the original judgment and the execution of the bond. § 205. Release of surety on attachment bonds by principal's discharge in bankruptcy. Since one of the purposes of an attachment is to secure a lien dating from the institution of the action, rather than from the docketing of the judgment, the question of the effect of the discharge in bankruptcy of the principal upon the liability of the surety on the bond given to vacate the attachment, is often confused by the courts with another question, namely, the effect of the adjudication in bankruptcy upon the attachment, considered as a "lien obtained by legal proceedings" within the provisions of sections 67-c and 67-f of the Bankruptcy Act. It is intended in this chapter to discuss these two questions separately, and the only decisions that will be considered at this point are those treating of the effect of the discharge upon the obligations of the attachment surety. Inasmuch as the liability of the surety on an attachment bond is practically always conditioned upon the obtaining of a final judgment against the principal defendant, as in the case of the appeal bond, it is not surprising that we find the same conflict 30 See 2 Remington (1922, 3d Ed.) Sec. 829, where the cases are collected. of authority in the decisions with respect to the former, as we have already seen to exist in the case of the latter. Thus, it has been held in Louisiana under the present Bankruptcy Act that the surety's liability on an attachment bond, being conditional upon the obtaining of a judgment by the attachment plaintiff against the attachment defendant, is discharged by the discharge in bankruptcy of the principal defendant prior to the obtaining of judgment, and that a limited, or special, judgment against the principal defendant, with perpetual stay of execution is improper.81 Brewing 31 Windisch-Muhlhauser Co. v. Simms (1911) 129 La. 134, 55 So. 739, in which case the court said: "In Keyes v. Shannon, 8 Rob. 172, 41 Am. Dec. 299, our predecessors decided that where property attached was released on the execution of bond with surety, and the debtor, before judgment, made a surrender of his property under the state insolvent laws, the surety will be discharged. The court held that the bond represented the property so far as the attaching creditors were concerned, that the cession of property dissolved the attachment, and that plaintiff, having no privilege on the property, could have no right of action on the bond.'' "The court said, inter alia, that the surety bound himself to satisfy such judgment as the plaintiffs might obtain against the defendants in the suit between them, and that the event on which the surety undertook and bound himself to pay never happened." "The doctrine of this case has never been overruled or modified. In Serra e Hijo v. Hoffman & Co., 30 La. Ann. 67, it was held that the defendant's discharge in bankruptcy pendente lite did not release the surety on their appeal bond. In that case a money judgment had been rendered against the defendants, who thereupon appealed to the Supreme Court, which affirmed the judgment. That case was decided on the well-recognized rule that the liability of a surety is not affected by the discharge in bankruptcy of the principal debtor. Section 16 of the Bankrupt Act of 1898 merely recognizes this general rule of law. Section 67f of the same statute, however, strikes with nullity all levies, attachments, or liens obtained through legal proceedings against an insolvent at any time within four months prior to the filing of a petition in bankruptcy in case he is adjudged a bankrupt. It is difficult to conceive how attachment proceedings thus pronounced null and void can produce any legal effect. The attachment being dissolved by operation of the statute, nothing is left but a suit in personam which is stayed by the pendency of the bankrupt proceedings. In such a case, the subsequent discharge of the debtor extinguishes the obligation on which the suit was based, and renders it legally impossible for the creditor to recover judgment against his former debtor. "While there is some conflict on this question among the cases in In some states it is held that, where the bond is given to avert, rather than to release or discharge, an attachment, and is conditioned upon the recovery of a judgment, the creditor should not be allowed a special judgment in order to bring about the condition upon the happening of which the liability of the surety depended.32 In other jurisdictions, if the attachment action in the state court is permitted to proceed to judgment, after the adjudication but prior to the defendant's discharge in bankruptcy, such a judgment is considered a "final" judgment, so as to fix the liability of the surety, notwithstanding that the judgment is released, as to the principal defendant, by the latter's subsequent discharge.33 It would seem, on principle, that the theory of such cases is a correct one, being analogous to the affirmance of a judgment on appeal prior to the discharge of the appellant § 206. Surety's liability after discharge of principal in bankruptcy on other classes of bonds. It seems that the surety on a bail bond, given in a civil action to prevent the arrest of, or a body execution against, the principal debtor, is released by the discharge in bankruptcy of the principal, the reason being that the discharge deprives the bail of his right to the custody other states, the weight of authority supports the conclusion reached by our predecessors in Keyes v. Shannon, supra, that a surety on a release bond given in an attachment suit is relieved by the bankruptcy of the defendant." See, to the same effect, Schunack v. Art Metal Novelty Co. (1911) 84 Conn. 331, 80 Atl. 290, a leading case on the question of the power of the state courts to direct, and the propriety of issuing, a special judgment. Contra, Light V. Hunt (1916) 17 Ga. App. 491, 87 S. E. 763. See also, Goodwin et al. v. Boston Clothing Co. (1925) R. I. 129 Atl. 611; Pinkard v. Willis (1900) 24 Texas Civ. App. 69, 57 32 Pullman Metal Specialty Co. v. Lang (1924) 101 Conn. 26, 124 Atl. 824; Fingold v. Schacter (1916) 223 Mass. 274, 111 N. E. 903, (money deposited "in lieu of an attachment bond.") 83 Berry Clothing Co. v. Shopnick (1924) 249 Mass. 459, 144 N. E. 392. Compare Laure V. Singer (1924) 100 N. J. L. 98, 125 Atl. 243, 4 A. B. R. (N. S.) 1161; Clauss v. Ainey (1924) 279 Pa. St. 534, 124 Atl. 183. of the principal, so that the bail can no longer terminate his liability by surrendering his principal to the proper authority." But a surety on an indemnity bond is not released by his principal's discharge in bankruptcy, the reasons being stated in Mechanics'-American Nat. Bank of St. Louis v. New England Equitable Ins. Co.: 85 "The liability of the principal and surety became fixed, under the terms of the bond, upon the breach thereof by the principal. The fact that the breach may have occurred within four months of the date of filing of the petition in bankruptcy, or that the liability was contingent upon the happening of an event which postponed the accrual of the cause of action until after the filing of the petition in bankruptcy, does not in any wise change or affect the measure of damages to be applied in determining the amount of plaintiff in error's claim." "The liability of the surety became absolute and the cause of action against it arose immediately upon the breach of the conditions in the bond. It was in no wise conditioned upon a judgment being first rendered against the principal. No judgment, therefore, was necessary against the principal to fix the liability of the surety.' The same result has been reached with respect to fidelity bonds.36 § 207. Effect of a confirmed composition. Since the confirmation of a composition under the Bankruptcy Act operates to release the bankrupt from his old debts, it is in effect a discharge.87 34 The leading cases on this point are Keyes v. Bennett (1905) 218 Ill. 625, 75 N. E. 1075; Almon H. Fogg Co. v. Bartlett (1909) 106 Me. 122, 75 Atl. 380, 138 Am. St. Rep. 338; Bryant v. Kinyon (1901) 127 Mich. 152, 86 N. W. 531, 53 L. R. A. 801. 35 (1921) Tex. Civ. App. 234 S. W. 1087, 1089. See also, Leader v. Mattingly (1904) 140 Ala. 444, 37 So. 270. 36 Boyd v. Agricultural Ins. Co. (1904) 20 Colo. App. 28, 76 Pac. 986. 37 Bankruptcy Act, Section 14-c: "The confirmation of a composition shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not af fected by a discharge." See Cumberland Glass Mfg. Co. v. Dewitt, & Co. (1915) 237 U. S. 447., 35 Sup. Ct. Rep. 636, 59 L. Ed. 1042. |