§ 17.] Debts Not Affected by Discharge- Debts Dischargeable.

v. Rogers, 13 N. Y. 59. Compare, however, apparently to the contrary, Miller v. Gillespie, 59 Mo. 220.)

SEC. 17. Debts Not Affected by a Discharge.-a A discharge in bankruptcy shall release a bankrupt from all of his provable debts, except such as (1) are due as a tax levied by the United States, the State, county, district, or municipality in which he resides; (2) are judgments in actions for frauds, or obtaining property by false pretenses or false representations, or for willful and malicious injuries to the person or property of another; (3) have not been duly scheduled in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; or (4) were created by his fraud, embezzlement, misappropriation, or defalcation while acting as an officer or in any fiduciary capacity.

Analogous Provisions of Former Acts.

As to the discharge as a release: R. S. section 5119; act of 1867, section 34; act of 1841, section 4; act of 1800, section 34. As to debts not affected by a discharge: R. S. section 5117; act of 1867, section 33; act of 1841, section 1. As to taxes: R. S. section 5101; act of 1867, section 28; act of 1800, section 62.

Debts Dischargeable.-As all provable debts, other than those explicitly excepted, are dischargeable it becomes important to collate with this section, section 63 which is as follows:

SEC 63. Debts which may be Proved.-a Debts of the bankrupt may be proved and allowed against his estate which are (1) a fixed liability, as evidenced by a judgment or an instrument in writing, absolutely owing at the time of the filing of the petition against him, whether then payable or not, with any interest thereon which would have been recoverable at that date or with a rebate of interest upon such as were not then payable and did not bear interest; (2) due as costs taxable against an involuntary bankrupt who was at the time of the filing of the petition against him plaintiff in a cause of action which would pass to the trustee and which the trustee declines to prosecute after notice; (3) founded upon a claim for taxable costs incurred in good faith by a creditor before the filing of the petition in an action to recover a provable debt; (4) founded upon an open account, or upon a contract express

Discharge no Extinguishment - No Release Unless a Discharge. [Ch. III.

or implied; and (5) founded upon provable debts reduced to judgments after the filing of the petition and before the consideration of the bankrupt's application for a discharge, less costs incurred and interests accrued after the filing of the petition and up to the time of the entry of such judgments.

b Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate.

The Discharge Not an Extinguishment of the Debt.-The discharge is not per se an extinguishment even of the bankrupt's liability. It is a release which may be pleaded. No court other than the court of bankruptcy is bound to take judicial notice of the discharge. When the bankrupt is sued upon a debt if he fails to plead and prove his discharge, he thereby waives it as a defense, and a valid and unimpeachable judgment may be entered against him. Compare DISCHARGE WAIVED UNLESS PLEADED and PLEADING the Discharge, post, this section.

No Release Unless There is a Discharge.-The present law contains no provision, as did certain former laws that the proving of a claim in bankruptcy, shall be a waiver of all other suits and proceedings to enforce it. Unless there has been a discharge which is thereafter pleaded and proved, a creditor who has proved his claim in bankruptcy and taken a dividend may still obtain judgment in an action, upon the balance due him and enforce the same. Nothing arising in the proceedings can protect the bankrupt from subsequent suit except a discharge. The payment of a dividend on a proved claim is merely equivalent to a payment in part. The taking of the debtor's property in bankruptcy and applying it pro rata on the claims of creditors have no greater effect than the taking of property on execution and applying the proceeds on a judgment. It is a satisfaction pro tanto, not a discharge. Consequently a plea of an adjudication in bankruptcy is not a good defense to an action. The proving of the debt is neither an absolute extinguishment nor a satisfaction. If the discharge is refused the creditor is remitted to all his former rights and remedies. (Dingee . Becker, Fed. Cas. 3,919; 9 N. B. R. 508; Whitney v. Crafts, 10 Mass. 23.)

17.] Discharge Releases Only the Personal Liability-Debts Due to Aliens.

Discharge Releases Only the Personal Liability.-Nothing but the bankrupt's personal liability is released by the discharge. Specific liens upon his property are in no way affected. Whatever their character if they are valid by the laws of the State, and not rendered void by the provisions of section 67 or other sections of the Bankruptcy Act, the bankrupt's discharge will not prevent their enforcement. Any proceeding to enforce a right against the bankrupt's property may be maintained which does not seek to enforce the personal liability of the debtor. Compare section 67 as to the effect of bankruptcy upon liens, and section 70 as to the trustee taking title subject to liens.

Provable Debts are Released Even if Not Proved.-The failure of the creditor to prove his debt, if it is provable, does not prevent it from being released by the discharge; not even in those cases where it was omitted from the schedules of debts and where the creditor was not served with a notice of the proceedings; unless the creditor can bring himself within the provisions of exception (3) of this section, which is new. (Compare In re Stansfield, Fed. Cas. 13,294; 16 N. B. R. 268; s. c. 4 Sawyer, 234; in re Archenbrown, Fed. Cas. 504; 11 N. B. R. 149; Lamb v. Brown, Fed. Cas. 8,011; 12 N. B. R. 522.)

Debts Due to Aliens.-A discharge in bankruptcy is as much a release of a debt due to an alien as of one due to a citizen of the United States. The purpose of the statute is to relieve the unfortunate bankrupt of all his provable debts upon his complying with the terms of the act, and as the alien may if he desires prove his claim, it is discharged whether or not he proves it. There is no need of any express provision extending the Act to debts due to aliens. (Ring v. Eickerson, 2 McCrary, 259; Murray v. De Rottenham, 6 Johns. Ch. 52; Ruiz v. Eickerman, 12 Cent. L. J. 60; Pattison v. Wilbur, 12 N. B. R. 193; s. c. 10 R. I. 448. Compare McDougal v. Carpenter, 17 Cent. L. J. 476.) And the discharge is a bar to the debt due an alien even though he was not a party to the proceeding, refused to consent to a discharge, and

Effect of Foreign Discharge — Debts of Married Women. [Ch. III.

in the courts of his own country prosecuted his claim to judgment and even though in that action in the foreign country the bankrupt failed to plead his discharge as a defense, which, in fact, he could not do. (Moore v. Horton, 32 Hun, 393.) And in a suit brought in the United States on the foreign judgment the discharge may be pleaded and will be a bar to a further recovery.

Effect of Foreign Discharge.-But a foreign discharge is no defense in an American court to the claim of a creditor who resides in one of the States and who was not a party and did not appear in the foreign proceedings. (Phelps v. Borland, 103 N. Y. 406.) The discharge is considered as local, and although an assignee of an individual who has become a bankrupt in a foreign country will, in most of the courts of this country, be allowed to maintain an action in his own name as assignee, yet our courts will not recognize the discharge as a bar to debts contracted in this country or due to citizens of this country. But a discharge under our laws operates on debts due to citizens of another country, to this extent that such aliens will not be permitted to sue therefor in the courts of our country. (In re Zarega, 1 N. Y. Leg. Obs. 40.) If a debt due from an alien is released by a foreign discharge, it may nevertheless be proved against him, if thereafter he is adjudged a bankrupt by an Ameri

can court.

But this is not the English rule which proceeds on principles of international comity. See Story on Conflict of Laws, chapter IX; Parsons on Contracts, chapter XII; Bankruptcy, and Insolvency; for further discussion of these principles.

Debts of Married Women.-Probably there are few States where the common-law rule as to the husband's liability for his wife's debts incurred by her dum sola has not been altered by statute. But wherever that rule exists, it may be said that a discharge granted to the husband releases him from the debts of his wife, incurred by her before marriage; and as long as he lives and his liability to pay those debts continues, not only is he dis

$ 17.]

Effect of Discharge - Debts to the United States, etc.

charged, but the wife's separate estate cannot be taken in payment of them. The marriage suspends her liability; the discharge releases him from his liability. (Vanderhayden v. Mallory, I N. Y. 452.) So if a woman marries after filing a petition in bankruptcy and thereafter procures a discharge, such discharge will not only release her but also her husband. The status of the claim is fixed at the time of the petition. (Chadwick v Starrett, 27 Me. 138.)

Effect of Discharge Granted to Members of a Firm.-This subject has been sufficiently discussed under section 5 ante relating to proceedings peculiar to partnerships.

Effect of Statute of Limitations on Debts.-While the general tenor of the decisions is that debts barred by the statute of limitations are not provable, there is some conflict of authority. The question will be discussed under section 63.

Effect of a Discharge Determined by the Court in Which Subsequent Action is Brought.-Although a discharge can no more be impeached in a collateral proceeding than any other judgment of a court of competent jurisdiction, yet the extent of its operation, that is, the question whether or not any particular debt is released by it, is left to be determined by the court in which an action is brought to enforce that particular claim. Such court will pass. upon the question, if the discharge is pleaded, and its determination will be binding as between the parties thereto. "The issue upon the effect of a discharge will arise when a creditor seeks to enforce a judgment or claim and the debtor pleads his discharge in bar thereof." (In re Rhutassel, 2 Am. B. R. 697; 96 Fed. 597; in re Thomas, I Am. B. R. 515; 92 Fed. 912; in re Mussey, 3 Am. B. R. 592; 99 Fed. 71.)

Debts to the United States, etc. Section 17a (1)-Under the act of 1867 it was finally decided by the Supreme Court, in U. S. v. Herron (20 Wall. 251), that debts due the U. S. were not provable in bankruptcy and consequently not released by a dis