Fisse v. Einstein

• Decision Date: 08 January 1878
• Parties: JOHN H. FISSE, ASSIGNEE OF PEOPLE'S SAVINGS INSTITUTION, Appellant, v. WILLIAM EINSTEIN ET AL., Respondents.
• Court: Missouri Court of Appeals

5 Mo.App. 78

JOHN H. FISSE, ASSIGNEE OF PEOPLE'S SAVINGS INSTITUTION, Appellant,

v.WILLIAM EINSTEIN ET AL., Respondents.

St. Louis Court of Appeals, Missouri.

Jan. 8, 1878.

1. A discharge in bankruptcy of a judgment-debtor will not release his sureties on a bond for appeal from a justice of the peace, executed before the institution of the proceedings in bankruptcy.

2. A composition with creditors under the Bankrupt Act of 1874 has the same effect as a discharge under the act of 1867. In neither case does the act operate upon the debt, and the remedy against the sureties remains.

3. A judgment-debtor is liable on the judgment as soon as it is rendered, and when his surety signs the appeal-bond he becomes “liable with him for the same debt,” within the meaning of the Bankrupt Act.

4. The meaning of the rule as to strict construction of a contract of suretyship is that the surety's obligation cannot be extended to other subjects, persons, or periods of time than those expressed or necessarily included in his contract; otherwise, the contract is subject to the ordinary rules of construction.

5. The words are to be taken most strongly against the surety, and then the intent and latitude of a contract of suretyship must be ascertained by a fair and liberal construction of the instrument, in furtherance of what appears to have been the intention of the parties when the contract was made, as appears from the expressions therein contained and from the nature of the transaction, and the surety will be bound to the full extent of what thus appears to be his contract.

6. Where, on appeal from a justice of the peace, the defendant confesses his indebtedness in the Circuit Court, and pleads in bar his discharge in bankruptcy, judgment should be rendered in his favor and against his sureties on the appeal-bond.

APPEAL from St. Louis Circuit Court.

Reversed and remanded.

DEXTER TIFFANY, for appellant: The discharge in bankruptcy of the principal will not release the surety on an appeal-bond executed before institution of the bankruptcy proceedings.-- Wilson v. City Bank, 17 Wall. 473; Merritt v. Glidden, 39 Cal. 559; Bond v. Gurdain, 4 Binn. 269; Holyoke v. Adams, 2 N. Y. 1. A composition under the Bankrupt Act only exonerates the bankrupt, and does not discharge his co-obligors or sureties.-- Mason & Hamlin Organ Co. v. Bancroft, 4 Cent. L. J. 295, and note; Gould v. Butler, 5 Cent. L. J. 423.

A. BINSWANGER, for respondents: A composition in bankruptcy discharges the bankrupt and his sureties on an appeal-bond.-- In re Trafton, 14 Nat. Bank. Reg. 508; In re Becket, 12 Nat. Bank. Reg. 201; Miller v. McKenzie, 13 Nat. Bank. Reg. 496 (approved in 14 Nat. Bank. Reg. 481); Wells v. Lamprey, 5 Cent. L. J. 259; In re Tooker, 14 Nat. Bank. Reg. 35. A surety on an appeal-bond is not liable where his principal has been discharged in bankruptcy pending the appeal, which discharge is pleaded in bar to the action.-- Carpenter v. Turrell, 100 Mass. 450; Haggerty v. Morrison, 59 Mo. 324; Martin v. Kilbourne, 1 Cent. L. J. 94; Payne v. Able, 7 Bush, 348; Odell v. Wooten, 38 Ga. 225; Jones v. Knox, 46 Ala. 53; Stratton v. Dumont, 2 Tenn. Ch. 633.

BAKEWELL, J., delivered the opinion of the court.

In October, 1875, appellant commenced suit before a justice of the peace, on promissory notes made by Einstein &Co., and indorsed by Stern & Brother, and obtained judgment; from which Stern & Brother appealed, Joel Swope becoming the surety on the appeal-bond. Pending this appeal, a petition in bankruptcy was filed against Stern & Brother, who effected a composition with their creditors under the Bankrupt Act of 1867, and the amendatory acts approved June 22, 1874. Plaintiff was enumerated in the schedule of creditors, as the law requires. The sum to be paid, by the terms of the composition, was twenty-five per cent. These proceedings were duly confirmed by the District Court, and ordered to be recorded. Afterwards, Stern & Brother paid into the clerk's office of the St. Louis Circuit Court, where the appeal from the justice was pending, twenty-five per cent of the claim, and costs, pleaded this payment and their discharge under the Bankrupt Act, and moved to dismiss the suit. The motion was sustained, the suit dismissed, and plaintiff appeals to this court.

The question before us is, whether a discharge in bankruptcy of the judgment-debtor will release the surety on an appeal-bond executed before the proceedings in bankruptcy were commenced. This question has been passed upon in other States, but the decisions are not accordant. In Missouri, the question is entirely new. In Haggerty v. Morrison, 59 Mo. 324, it was determined that where, on appeal from a judgment, appellant files in the Supreme Court his certificate of discharge in bankruptcy, and likewise his plea showing that the judgment was allowed against his estate in the bankrupt-court, and the plea stands admitted, the Supreme Court will order his discharge. But the case is not in point. It was not an appeal from a justice; it does not appear that any bond had been given or supersedeas asked, and the liability of sureties is not considered in the case. The court refers, indeed, to Carpenter v. Turrell, 100 Mass. 450, but we do not on that account feel bound to follow the reasoning or adopt the conclusions of the Massachusetts case in a matter not shown to be before the court citing it. The question is a res integra in Missouri, and we have given to it the careful consideration which its importance seems to demand.

The Bankrupt Act (sec. 5118) provides that “no discharge shall release, discharge, or affect any person liable for the same debt for or with the bankrupt, either as partner, joint contractor, indorser, surety, or otherwise.”

The condition of the appeal-bond in this case is, that if, on appeal, the judgment of the justice be affirmed; or if, on trial anew in the appellate court, judgment be given against the appellant, and he shall satisfy the same; or if his appeal shall be dismissed, and he shall pay the judgment of the justice, together with costs of the appeal, the recognizance shall be void. Wag. Stat. 847, sec. 3.

1. In Georgia and Tennessee ( Odell v. Wooten, 38 Ga. 225; Martin v. Kilbourne, 1 Cent. L. J. 94), it is held that the clause of the Bankrupt Act only applies to a surety who contracted to become liable for the payment of the debt, and not for the payment of the judgment which might be entered in a particular action; that it clearly contemplates a case where the surety contracts to become liable with the principal for the payment of the debt; and that, when a discharge is pleaded in the appellate court, so that no judgment can be rendered against the defendant, a surety on an appeal-bond conditioned to pay such judgment as might be entered in the appellate court is released, because no judgment in the appellate court is, or can be, rendered against the principal after his discharge. And in Massachusetts, Kentucky, and Texas ( Carpenter v. Turrell, 100 Mass. 450; Payne v. Able, 7 Bush, 344; Williams v. Atkinson, 36 Texas, 16), it is held that the clause applies only to persons who are liable for the debt of the bankrupt which existed before, and is discharged by the proceedings in bankruptcy; and that a bond given to dissolve an attachment is not such a debt, and does not become a debt until the contingency of a judgment which the principal is bound to pay; and that the bond is discharged by a judgment for the defendant on a plea of discharge in bankruptcy, as that determines the contingency upon which the obligation of the bond is made to depend. Bump (10th ed.), 747. In New York, it has been decided that the sureties in a delivery-bond in attachment assume the payment of the debt alleged, where established, in consideration of the delivery of the attached property; that they thus become the debtors of plaintiff, on this condition; and that their liability depends upon whether the debtor, at the time of the giving of the undertaking, was lawfully indebted to the plaintiff; and that the subsequent discharge of the debtor in bankruptcy will not affect the liability of these sureties, nor hinder the recovery or judgment, where the bankruptcy proceedings were not commenced within four months of the levy. The Massachusetts doctrine on the subject is noted in Holyoke v. Adams, 8 N. Y. Sup. Ct. 223, and disapproved. In a more recent New York case,-- Knapp v. Anderson, 14 N. Y. Sup. Ct. 297 (1876),--it is expressly decided that the sureties in an undertaking upon an appeal are not released from their liability to the respondents by the discharge of the appellant from his debts under the Bankrupt Act. The court holds that the surety on the appeal-bond is “liable for the same debt with the bankrupt,” within the meaning of the Bankrupt Act, before the affirmance of the judgment.

2. The case before us is one of a composition with creditors. But a composition with creditors, under the act of 1874, has the same effect as a discharge under the act of 1867. In both cases, the act operates upon the remedy; and in neither case does it so operate upon the debt as to extinguish it for all purposes. Whilst the debtor is exonerated, the remedy against sureties remains in full force. Mason & Hamlin Organ Co. v. Bancroft, 4 Cent. L. J. 295. The case before us, then, is as if defendants had been discharged under sec. 17 of the act of 1867.

The existing Bankrupt Act, that of 1841, that of 1800, and the Bankrupt Act passed in the reign of Queen Anne,--which was the model of all the others,--all contain provisions guarding against such a construction of the act as will discharge sureties. This seems to be by abundant caution. The contract of a surety is always that he shall not be discharged by the insolvency of the principal. In fact, ordinarily, the surety cannot be reached at all until his principal is insolvent, and shown to be so, and until all remedies against him are exhausted. The...