White v. Murray

Upon the decision of the exceptions in this case, the plaintiffs moved to take off the stay of execution which had been entered, but the defendants oppose it. They say that the judgment obtained in the case, in which the attachment bond now in suit was given, was suffered to be entered by default by the insolvent within four months of the filing of the petition. This is true; but it was a suit brought and judgment obtained before the proceedings in insolvency were commenced, and there is nothing to show that there was any knowledge on the part of the plaintiffs in the prior suit, or even on the part of the defendant, that Murray was not able to go on in business if he should be forced to pay their debt, and nothing to show that the judgment was suffered to be entered against Murray with the intent to hinder, delay or defraud his creditors. The judgment was entered October 1, 1896; execution issued October 3, and the petition in insolvency was filed October 5, 1896. It is claimed for the plaintiffs that, as this suit on the bond was not brought until November 17, 1896, it is not within the insolvency proceedings and is not affected by Murray's discharge. We think the cause of action accrued upon the entry of the Judgment, and hence that this was a provable claim against Murray and so is covered by his discharge. Judgment having been entered in the suit, the discharge cannot be pleaded because the suit is at an end; but the insolvent is none the less entitled to the benefit of it. This however does not affect the sureties, since the entry of the judgment against Murray fixed their liability under the bond, because that was the contingency upon which the liability depended.

But this suit being upon a bond in which Murray was principal and the other defendants were sureties, the Insolvency Act provides for the exigency in section 52: "The liability of a person who is a co-debtor with, or guarantor, or in any manner surety for a person who has been adjudged insolvent and thereafter been discharged, shall not be abridged or altered by such discharge."

The defendants claim that this refers only to sureties for the original debt. But this clearly is not so. They were sureties for the judgment, if any should be entered. The debt is merged in the judgment, and it is from the judgment that Murray is released by his discharge. This judgment existed before, and is discharged as to Murray by the insolvency proceedings against him. Hence the other defendants were his sureties within the provisions of the act. Carpenter v. Turrell, 100 Mass. 450. The discharge of Murray, however, does not operate to discharge the sureties after their liability has become fixed by the happening of the contingency of the bond. Claflin v. Cogan, 48 N.H. 411;Dyer v. Cleveland, 18 Vt. 241; Towle v. Robinson, 15 N.H. 408; Hall v. Fowler, 6 Hill (N.Y.), 630; Garnett v.Roper, 10 Ala. 842. See also notes of decisions on corresponding provision of the U.S. Bankrupt Law in Bump on Bankruptcy § 5718, p. 726, 8 ed.

The plaintiffs being entitled to their execution against the sureties, their motion to take off the stay is granted as to them and a perpetual stay is ordered as to Murray.