Case Name: Hardy vs. Carter
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1847-12
Citations: 8 Hum. 153
Docket Number: 
Parties: Hardy vs. Carter.
Judges: 
Reporter: Tennessee Reports
Volume: 27
Pages: 153–159

Head Matter:
Hardy vs. Carter.
A principal who has been discharged in bankruptcy after due notice to his endorser is discharged from his liability, though such endorser may not have paid the money till afterthe decree of discharge.
Hardy was the maker of a promissory note for #226, and Carter was the endorser. After the note become due, Hardy obtained a decree of discharge from his engagenients in bankruptcy, after due notice to .Carter. Subsequently Carter paid the money and brought suit against Hardy-in the circuit court of Davidson county.
An agreed case was there made in which the above facts were submitted to Maney, presiding judge, who being'of the opinion that the principal, Hardy, was not discharged by the decree give judgment against the, defendant, and from that judgment Hardy appealed.
/. M. Lea, for the plaintiff in error.
The agreed case shows that Carter was the endorser; Hardy, one of the makers of a promissory note discounted by the Planters’ Bank of Tennessee. Whilst the bank was the holder of said note, Hardy petitioned in the court of bankruptcy for a discharge from all his debts and engagements, gave regular notice thereof to the bank, and finally obtained his certificate of discharge. Some time after said certificate of discharge was obtained by Hardy, Carter paid the money, took up' said note from the bank, and has since instituted suit against Hardy. Now can Carter recover notwithstanding said certificate of discharge is pleaded by Hardy?
During the pendency of the proceedings in the court of bankruptcy, Carter was not a creditor of Hardy. The cause of action or right to sue which a surety has against his principal or an endorser against the maker of a note, commences in point of time with and is founded upon payment of the money. Marshall vs. Hudson's adm'r, 9 Yerg. 57. Until payment by the surety or endorser, he is not a creditor, and can institute no proceedings either legal or equitable, not even by way of an attachment in equity. Turner vs. Newman, 4 Humph. 329. The statute of limitations does not begin to run among co-sureties for contribution till the cause of action occurs by payment of the money. 10 Yerg. 521. A construction has also been applied to our act of 1715, ch. 48, sec. 9, which, with the other authority cited, clearly shows, that in no possible case can a man be barred by any act of limitations unless he has had for the requisite number of years, a technical legal right to sue. See Caplinger vs. Vaden, adm'r. 5 Humph. 629. All of our acts of Assembly, then, passed to prevent the recovery of stale demands, are. impotent to release Hardy from the payment of this claim, and we will now examine whether the word creditor as used in the bankrupt law has a different signification than as above indicated.
The act of Congress declares, that the certificate shall be deemed a full discharge from all debts, &c., proveable under the commission, and in the next section recites what debts are proveable — first, creditors generally — those who have a right to sue — next, creditors whose debts are not due and payable till a future day, annuitants, holders of bottomry and respondentia bonds, holders of policies of insurance, sureties, endorsers, and other persons having uncertain or contingent interests &c. Now, I contend it is optionary with the persons constituting this latter class whether they must prove or not, for the act says, they may come in and prove, and having come in and proved, they shall be deemed to have waived all future right of action. There certainly is a kind of indebtedness or a sort of obligation not embraced by the provisions of the bankrupt law. Suppose the petitioner was surety on an administration bond, no breach had occurred, and some years after the admin- istfator had proved a defaulter, would the right of action against the-surety be gone? Unquestionably not — and the point has been directly decided in the case of McDougal vs. Patton, 8 Taunton 484. Other instances might be put — such as a surety for the performance of covenants which were not broken at the time of the bankruptcy. In the case of two co-sureties, it has been held that statute 6 Geo. 4, ch. 16, the last and most liberal of all the English acts — did not apply. 5 Barnwell & Alderson’s Reports, 372. The surety before the passage of said last act, could not prove unless he could show he had made the payment before bankruptcy. There is a case in 3 Adol. & Ellis N. S. 48, which decides that a surety who has paid after bankruptcy of the principal has no remedy because the claim was proveable under the 52d section ch. 16 of 6 Geo. 4, and therefore barred by sec. 121 of that act. . This is the strongest case in all the books and would be conclusive if our act was similar to the English act. But it is conceived that the English act makes it imperative upon the surety to prove, as much so as if he were a judgment or bond creditor — nothing is said about waiving the right to sue if the creditor chooses to come in and prove. A close examination of these statutes will show they are essentially different in many particular’s — the one could not have been intended as a copy of the other. This case then apparently so strong, turns out upon examination to be no authority. That act provides that annuity creditors shall prove before they sue the surety, and the surety shall then stand in the place of the annuity creditor — it provides a certain mode of proceeding in cases of bot-tomry and respondentia bonds, and policies of insurance, and debts payable on a contingency — while our act recites all such creditors in a general way and declares that they may prove and, if they do, they, shall be considered as waiving all future right of action.
The bankrupt law, odious as it is in the eyes of some, and just and equitable as it seems to those who have availed them selves of its benefits, should receivejust such a construction as is warranted by the language used. Perhaps, it was intended to embrace a case like the present, but we can only gather the intention from what is expressed, and it devolves on him who pleads the act, to show clearly that his case is comprehended by its provisions.
A. Ewing, for the defendant in error.
The agreed case shows that C. C. Hardy as a member of the firm of Hardy, Royster & Co. executed a promissory note to A. C. Carter, who endorsed it for their accommodation. The note was discounted, fell due and was protested.. After-wards the note fell due, C.C. Hardy applied for discharge in bankruptcy, and it was granted. Carter then paid the note, and sued Hardy.
The question raised is whether this liability to Carter is covered by the discharge in bankruptcy.
We say it is. The 3d section of the bankrupt law denudes the applicant of all his property, legal and equitable. The 4th section provides for his discharge from all debts or engagements proveable under the act. The 5th section authorizes proof of debts to be made by sureties and endorsers.
It would seem that these three sections read together make the inference of discharge' irresistible. But it is said that the next clause of the 5th section says that if proof is made the bankrupt is discharged from the claim, and therefore an option is given to endorsers to claim or not. This is true, but the option applies equally to all other creditors, and if the proof of claims is the test, of discharge, the bankrupt law is nugatory. This however, could not be contended for and the truth is that this clause was intended to cover fiduciary claims ■which it has been decided may be proved, although there is no obligation to do so.
Again: Independent of the particular wording of the acts, the general principles governing-bankrupt laws in England settle this question: the power of proof and the right of discharge have always been considered co-extensive. See Chitty on Contracts 151-2. As they have successively enlarged the power of proof in England, they have also ruled the discharge. See 43 E. C. Law Rep. 625. __ .

Opinion:
GREEN, J.
delivered the opinion of the court.
This is an action of debt, or an endorsement of a promissory note. The following agreed case, was submitted for the judgment of the court. "C. C. Hardy, as one of the members of the firm of Hardy, Royster & Co., executed the note, described in the declaration, on the day it bears date, and, on the same day it was endorsed by the plaintiff for the accommodation of the defendant, and was then regularly discontinued by the Planter's Bank of Tennessee. Whilst the note was held by the bank, and before the money was collected, although it was then due and payable — C. C. Hardy applied for the benefit of the bankrupt act of 1841,- and, having given the holder of the note regular notice', he was finally discharged-from his debts, as shown by his,certificate: after the discharge, the plaintiff here paid the money in the note to the holder, and now, sues, C. ,C. Hardy, to recover the debt."
The court decided, that the certificate of discharge in bankruptcy was no bar to the action, and gave judgment against the defendant, from which judgment, this appeal in error is prosecuted.
The question is, whether the liability of Hardy to Carter, his endorser, is covered by the discharge in bankruptcy?
By the third section of the bankrupt law, the entire property of the bankrupt, legal'and equitable, is vested in the assignee.
The fourth section provides, "that the certificate, shall, in all courts of justice be deemed a full and complete discharge of all debts, contracts and other engagements of such bankrupt which are provable, under this act," &c. In the fifth section, it is provided that "all creditors whose debts are not due and payable, until a future day, annuitants, holders of bottomy and respondentia bonds, holders of policies of insurance, sureties, endorsers, bail, or other persons having uncertain or contingent demands against such bankrupt, shall be permitted to come in and prove such debt or claims under this act and shall have a right, when their debts or-claims become absolute to have the same allowed them" &c.
We think these provisions of the law, are decisive of the question. By the fifth section, sureties and endorsers, may prove their debts, although the demand be uncertain or contingent. And, by the fourth section, the bankrupt is discharged from all debts, contracts, and other engagements which are proveable under the act. All demands that may be proved, are-of course, proveable: the discharge of the bankrupt is then co-extensive with the right of the creditor to prove —except as to fiduciary claims, which are excepted in the statute. See also, Chitt. on Con. 151-2, 43; E. C. Law Rep., 6, 25.
It is insisted that the subsequent provision of the fifth section, that "no creditor, or other person, coming in or proving his debt, or other claim, shall be allowed to maintain any suit at law or in equity, therefor," shows, that the creditors last before mentioned, might prove or not at their election, and; that they are not barred, unless they do come in and prove.
We cannot concur in this construction — so to hold, would render the law nugatory. It would be optionary with all creditors, whethey they prove or not — and, if they choose not to prove — the certificate of the bankrupt, would be no discharge.
We think, the court erred in rendering judgment against the defendants — and reverse the judgment.