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

record made in the lower court will be considered by it, then the surety will be liable on the appeal bond (Knapp v. Anderson, 15 B. R. 316; s. c. 7 Hun. 295; [affirmed] 71 N. Y. 466; Cornell v. Dakin, 38 N. Y. 253; Poppenhausen v. Seeley, 3 Abb. Ct. of App. Dec. 615; Hall v. Fowler, 6 Hill [N. Y ], 630; Flagg v. Tyler, 6 Mass. 33; Burr v. Carr, 7 Bing. 508; Southcote v. Braithwaite, 1 T. R. 624). A creditor, it has been said, is under no obligation to appear in a bankruptcy proceeding and object to a discharge in order to save his rights against a surety, even though the surety request him to do so (Ex p. Jacobs, 44 L. J. B. 34; Mason & Hamlin v Bancroft, 1 Abb. N. C. 415; s. c. 4 Cent. L. J. 295); yet, as to that, the authorities are not agreed (In re McDonald, 14 B. R. 477). Nor is he obliged to make himself a party to prove his claim and collect what he can from the estate (Clapton v. Spratt, 52 Miss. 251), for the surety has it within his own power to protect himself (857).

A joint debtor who has been discharged in bankruptcy is a necessary party to any proceedings to enforce a joint obligation (Jenks v. Opp, 12 B. R. 19; s. c. 43 Ind. 108; Camp v. Gifford, 7 Hill 169; in re Marshall Paper Co. [C. C. A.], 102 Fed. Rep. 872). A surety who has been released from a joint obligation cannot be required to contribute to other co-sureties who have paid the obligation (Tobias v. Rogers, 13 N. Y. 59. Contra: Miller v. Gillepsie, 59 Mo 220).

1 As to what debts may be proved, see §63. Courts, other than those of bankruptcy, do not take judicial notice of a discharge. It must be pleaded as a defense, otherwise it will be considered waived and a valid judgment may be entered (Jenks v. Opp, 12 B. R. 19; s. c. 43 Ind. 108; Horner v. Spellman, 78 Ill. 206, 410; McDonald v. Davis, 105 N. Y. 508; Revere v. Dimock, 90 N. Y. 33; s. c. [affirmed] 117 U. S. 559; Monroe v. Upton, 50 N. Y. 593; Manwarring v Kouns, 35 Tex. 171; Stewart v. Green, 11 Paige, 535; Wolf v. Stix, 99 U. S. 1; Graham v. Pierson, 6 Hill 24; in re Wesson, 88 Fed. Rep. 855).

Whenever advantage is sought to be taken of a discharge as a defense, it should be set up either in the original or supplemental pleadings rather than by motion (Fellows v. Hall, 3 MacLean 281), and the plaintiff will be at liberty to reply thereto, setting up the fact that the debt was not released as it came within an exception, particularly specifying the exception (Cutter v. Folsom, 17 N. H. 139). If a case be in a situation, or the practice of the court be such that a discharge cannot be pleaded before the entry of judgment, an application may be made for a perpetual stay of execution (Cornell v. Dakin, 38 N. Y. 253; Palmer v. Hutchins, 1 Cow. 42; Baker v. Taylor, 1 Cow. 165; Revere v. Dimock, 90 N. Y. 33; Monroe v. Upton, 50 N. Y. 593; Graham v. Pierson, 6 Hill 247). A practice which would serve the same purpose and be much less annoying and expensive, would be to open the judgment on motion after notice to the adverse party to admit the plea of discharge. This practice could be followed in all courts of record having original jurisdiction. (See Shurtleff v. Thompson, 12 B. R 524; s. c. 63 Me. 118; Manwarring v. Kouns, 35 Tex. 171; Bellamy v. Woodson, 4 Geo. 175; M. L Ins. Co. v. Cameron, 1 Abb. N. C. 424; Humble v. Carson, 6 B. R. 84).

A discharged debt may be revived by a definite promise to pay (Stern v. Nussbaum, 5 Daly [N. Y ] 382; s. c. 47 Howard Pr. 489; Allen v. Ferguson, 9 B. R. 481; s. c. 18 Wall. 1; Harris v. Peck, 1 R. I. 262; Craig v. Seitz, 63 Mich. 727; Evans v. Carey, 29 Ala. 99; Horner v. Speed, 2 Pat. & H. 616), made at any time after the filing of the petition (Jersey City Ins. Co. v. Archer, 122 N. Y., and cases there

2

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 ;3 or (4) were created by his fraud, embez

cited; in re Montgomery, 3 B. R. 426), the moral obligation to pay being a sufficient consideration to sustain it (Dusenbury v. Hoyt, 10 B. R. 313; s. c. 53 N. Y. 521; 14 Abb. Pr. [N. S.] 132; Gardner v. Bowen, 23 Weekly Digest 252). Unless the State law requires it, the promise need not be in writing (Henley v. Lanier, 10 B. R. 280; s. c. 75 N. C. 172; Apperson v. Stewart, 27 Ark. 619; Fraley v. Kelly, 67 N. C. 78; Hernthal v. McRea, 57 N. C. 21; Kingsley v. Cousins, 47 Me. 91). The promise will not be inferred, however, from such acts and statements as would avoid a statute of limitations. Not even the payment of interest on the discharged debt, or the payment of a portion of the principal, will be sufficient in itself to revive it (Allen v. Ferguson, 9 B. R. 481; s. c. 18 Wall. 1; Lawrence v. Harrington, 122 N. Y. 408; Wheeler v. Simmons, 60 Hun. 404; s. c. 39 N. Y. St. Rep. 797; Cambridge Inst. v. Littlefield, 60 Mass. 210). There must be a clear intention to revive the debt, and the best and perhaps the only safe way is to have that intention expressed in writing—in a promissory note or some other obligation.

'These debts have priority, and need not be proved as other debts, the court determining all questions that may arise regarding the amount or legality (864). 2The fraud upon which the judgment is founded must be actual and not constructive (Neal v. Clark, 95 U. S. 704; s. c. sub nom. Neal v. Scruggs, 17 B. R. 102), and it must have existed at the inseption of the debt (Brown v. Broach, 52 Miss. 536; in re Roy, 13 B. R. 235; s. c. 1 Woods, 42; Forsyth v. Vehmeyer [U. S. Sup. Ct.], 20 Sup. Ct. Reporter, 623).

The judgment excepted by this subdivision, or the record on which it is based, must show that the action from which it springs was for the causes specified, and if it does not so appear, the judgment will not come within the exception. (See in re Patterson, 1 B. R. 307; in re Whitehouse, 1 Lowell, 429; Warner v. Cronkhite, 13 B. R. 52; s. c. 6 Biss. 453). It should be remembered that this exception relates only to judgment debts as distinguished from debts not reduced to judgments. The question as to whether a judgment sought to be enforced against a discharged bankrupt was rendered for fraud will be determined by the court from the record, which is conclusive, it is said in Forsyth v. Vehmeyer [Ill.], 1 N. B. News, 141. In Parker v. Whittier [C. C. A ], 1 N. B. News, 240; s. c. 91 Fed. Rep. 511, however, it was held that the cause of action did not become merged in a judgment thereon so as to preclude the plaintiff from showing that the original debt was created by the fraud of the debtor.

I

A judgment in an action for fraud does not include a claim by sureties on a replevin bond against their principals where the judgment went against the principals on the ground of fraud, and on failure of the principal to pay such judgment, the sureties must do so (In re Blumberg [D. C.], 1 N. B. News, 258; s. c. 94 Fed. Rep. 476).

"Under the Act of 1867, proceedings in bankruptcy had the nature of proceedings in rem, and if the court once gained jurisdiction of the bankrupt and the subject-matter, its decrees were binding on all creditors whether their claims were

zlement, misappropriation, or defalcation, while acting as an officer or in any fiduciary capacity.'

included in or omitted from the schedule, and irrespective of the notice or actual knowledge here specified (Rayl v. Lapham, 27 Ohio St. 452; Thurmond v. Andrews, 13 B. R. 157; s. c. 10 Bush, 400; Platt v. Parker, 13 B. R. 14; s. c. II N. Y. Supreme 135; s. c. 6 N. Y. Supr. 377; Lamb v. Brown, 12 B. R. 522; s. c. 7 C. L. N. 363; Black v. Blazo, 117 Mass. 17; s. c. 13 B. R. 195). But whether the same will be true under the present statute, which expressly provides that they shall not be affected unless the creditor has notice or actual knowledge, depends upon the construction the courts will place upon "notice." As used in this section, it would seem that an actual notice was contemplated; but as employed in 58, it appears that a constructive one will answer the requirement. The word has been construed with reference to discharges on compositions, and it has been held that the failure of a creditor to get the notice was no ground for setting aside a composition (In re Rudnick Bros. [D. C.], 1 N. B. News, 276; s. c. 93 Fed. Rep. 787). That is a substantial holding that a constructive notice is sufficient, and it follows that the provable and dischargable debts will be released whether included in or omitted from the schedule, if the notices are given as provided for in 858.

'It should be particularly noticed that the debts unaffected by a discharge under this subdivision are not simply such as spring from fraud, embezzlement, misappropriation or defalcation, but such as arise from these causes while the bankrupt has been acting as an officer or in a fiduciary capacity. The fraud contemplated in the second subdivision is independent of the relation between the bankrupt and the creditor; though it must be an actual and not a constructive fraud (Neal v. Clark, 95 U. S. 704; s. c. 17 B. R. 102) If property comes into one's possession lawfully to be held as collateral and is converted, such conversion will not amount to a fraud within the meaning of this provision of the bankrupt law (Hennequin v. Clews, 111 U. S. 676; s. c. 77 N. Y. 427; 84 N. Y. 676). Nor will the failure of a factor to account or remit for goods left with him to be sold on commission (Chapman v. Forsyth, 2 How. 202; in re Basch [D. C.], 97 Fed. Rep. 761), or the failure of commission men, collection agents, auctioneers or persons handling money or property for others under contract arrangements (Hayman v. Pond, 7 Met. 328; Anstill v. Crawford, 7 Ala. 333; Com. Bank v. Buckner, 2 La. Ann. 1023). This rule is founded upon the conclusion that the relations between the parties rested entirely in contract, the breach of which was to be considered one of contract rather than one of trust (Chapman v. Forsyth, supra).

CHAPTER IV.

COURTS AND PROCEDURE THEREIN.

SEC. 18. Process, Pleadings and Adjudications.a Upon the filing of a petition for involuntary bankruptcy, service thereof, with a writ of subpoena, shall be made upon the person therein named as defendant in the same manner that service of such process is now had upon the commencement of a suit in equity in the courts of the United States, except that it shall be returnable within fifteen days, unless the judge shall for cause fix a longer time; but in case personal service cannot be made, then notice shall be given by publication in the same manner and for the same time as provided by law for notice by publication in suits in equity in courts of the United States.2

1As to the issuance of process, summons and subpœnas, see Rule III; as to the filing of petitions against the same person in different districts, Rule VI; as to amendments, Rule XI; as to duties of Referee, Rule XII; and as to general provisions, Rule XXXVII.

Under the U. S. equity practice, a suit is deemed to be pending after the same has been entered upon the docket on the return of the subpoena as served (Eq. Rule XVI), though a suit in bankruptcy will unquestionably be deemed commenced and pending when the petition is filed (867), rather than when the mesne process, subpoena, is issued (In re Lewis [D. C.], 91 Fed. Rep. 632. See also §31 as to computation of time). In view of the equity rules now in force, the clerk shall issue a subpœna (Eq. Rules VII, XII) returnable within fifteen days from the issuance thereof, unless the judge shall for cause extend the number of days, a copy of which, together with a copy of the petition, shall be served upon the defendant, the person against whom the petition is filed. This service shall be made by the marshal of the district, his deputy or some other person specially appointed by the court for that purpose (Eq. Rule XV), who shall serve such copies by delivering the same to the defendant personally, or by leaving them at the dwelling house or usual place of abode of the defendant, with some adult person, who is a member of or resident in the family (Eq. Rule XIII).

2If the defendant cannot be found within the district so as to make personal service of the subpoena upon him, or he shall not voluntarily appear, it shall be lawful for the court to make an order directing such absent defendant to appear, plead, answer, or demur to the petition at a certain day therein to be designated, which order shall be served on such absent defendant, if practicable, wherever found; or where such personal service is not practicable, such order shall be published in such manner as the court shall direct. If the defendant does not appear and comply therewith upon proof of service or publication of the order, the court may

b The bankrupt, or any creditor may appear and plead to the petition within ten days after the return day, or within such further time as the court may allow.'

entertain jurisdiction the same as though the defendant had been served with process within the district, and proceed to a hearing and adjudication of the petition; but such adjudication shall only affect the property of the absent defendant within the district (Act of June 1, 1872, $13). The order must be published within the county and district where the defendant resides or where the major part of his property is situated, the court to designate the newspaper (§28).

1The plea may embody both an answer and demurrer (Orem v. Harley, 3 B. R. 263; in re Nickodemus, 3 B. R. 230), but if it be the latter only, and it is overruled, an absolute adjudication of bankruptcy may be entered (In re Benham, 8 B. R. 94). If the petition should not be sufficiently verified, objection should be taken to it before a plea and answer on the merits, otherwise it will be waived, and this, too, though the court does not permit the answer to be filed (Simonson v. Sinsheimer [C. C. A.]. 95 Fed. Rep 948). The time allowed for pleading cannot be shortened by a written admission of insolvency. The subpoena must be issued and no reference can be made until such time has expired (In re L. Humbert Co. [D. C.], 100 Fed. Rep. 439). It has been held, however, that where process and time to plead were waived by defendant, an adjudication forthwith made would not be set aside upon the application of a stranger when neither the bankrupt nor any of his creditors object to the decree (In re Columbia Real Estate Co. [D. C.], 101 Fed. Rep. 965). If the allegations in the petition are uncertain or indefinite, the court, on motion, may dismiss the petition, or order a more definite one to be filed (In re Melick, 4 B. R. 97; in re Randall & Sunderland, 1 Deady, 557; s. c. 3 B. R. 18). Any one creditor appearing to oppose the adjudication, may interpose any plea or defense available to the debtor (In re Cornwall, 9 Blatch. 114; s. c. 6 B. R. 305; in re Ouimette, 3 B. R. 566; s. c. 1 Saw. 47; in re Scrafford, 14 B. R. 184). The jurisdiction of the court may be questioned (In re Williams, 14 B. R. 132) as in any proceeding at law or in equity, and the party opposing may introduce set-offs or payments made since the filing of the petition, for the purpose of showing that the defendant does not owe debts to the amount of one thousand dollars as provided in section four, or that the petitioning creditors have not provable claims in excess of the value of securities held by them, aggregating five hundred dollars as provided in section fifty-nine (In re Cornwall, supra; in re Skelley, 5 B. R. 214; S. C. 3 Biss. 260; in re Ouimette, supra; in re Osage R. R. Co., 9 B. R. 281. See also in re Tierre [D. C.], 95 Fed. Rep. 425; s. c. 1 N. B. News, 402; in re Folb [D. C.], 1 N. B. News, 134; s. c. 91 Fed. Rep. 107; in re Curtis et al. [C. C. A.], 1 N. B. News, 357; s. c. 94 Fed. Rep. 630; s. c. [D. C.], 91 Fed. Rep. 737; in re Mills [D. C. 95 Fed. Rep. 269; Simonson v. Sinsheimer [C. C. A.1, 95 Fed. Rep. 948; in re Romanow [D. C.], 92 Fed. Rep. 510; in re Beddingfield [D. C.], I N. B. News, 385; s. c. 96 Fed. Rep. 190; in re Schwartz [D. C.], 1 N. B. News, 266; in re Mercur [D. C.], 95 Fed. Rep. 634; and §46 and notes thereto). If this were established, it would be the duty of the court to dismiss the proceedings for want of jurisdiction without inquiring into the questions of solvency or acts of bankruptcy specified in section three. It has been said that a tender of payment of the petitioners' debt is no defense (In re Williams & Co., 1 Lowell, 406; s. c. 3 B. R. 286; in re Ouimette, supra). This is based on the supposition that insolvency exists because of which a payment in accordance with the tender would amount to a preference. The sufficiency of an answer to a petition in bankruptcy cannot be raised by a demurrer, that question being tested under the U. S. equity practice by setting the case down for a hearing upon the bill and answer (Goldman, Beckman & Co. v. Smith [D. C.], 1 N. B. News, 160; s. c. 93 Fed. Rep. 182,