the bankrupt principal though the latter has received a discharge.69 A peculiar feature of the situation is that if the surety is allowed the right of proof, it is of no value to him. At most it insures him what he ought to have in any event, namely, that a dividend shall be paid on the debt to the creditor and the surety's ultimate loss be only for the balance.70 Even though the principal debtor expressly promised the surety to indemnify him, so that there are two valid contracts made by the principal, one with the creditor and one with the surety, and though both claims are provable, the estate will pay but one dividend 71 because of the bankruptcy rule forbidding double proof--forbidding that is, more than one dividend on one debt, no matter by how many contracts or with how many persons the bankrupt may have bound himself to pay it.7

72

In spite of the lack of express statutory provision the claim of the surety against the bankrupt principal has been held provable and therefore discharged by the Supreme Court of the United States although at the time of filing the petition the surety has not yet been compelled to pay the creditor.73

69 Page v. Bussell, 2 M. & Sel. 551; Welsh v. Welsh, 4 M. & Sel. 333; Hewes v. Mott, 6 Taunt. 329; M'Dougal v. Paton, 8 Taunt. 584; Taylor v. Young, 3 B. & Al. 521; Newington v. Keeys, 4 B. & Al. 493; Watkins v. Flanagan, 1 Gl. & J. 199; Watkins v. Flanagan, 1 Bing. 413 (affirming s. c. 3 B. &. Ald. 186); Freeman v. Burgess, 6 L. J. C. P. 34; Thayer v. Daniels, 110 Mass. 345; Smith v. McQuillin, 193 Mass. 289, 79 N. E. 401.

70 Section 57 i of the Bankruptcy Act of 1898, authorizes the surety to prove the debt for which he is surety on behalf of whom it may concern, and the dividends will then be paid to the creditor unless the surety has previously paid, in which event the surety will receive dividends. The provision not only permits a surety to compel proof against a bankrupt principal's estate, but allows one who is, as between himself and the bank

rupt, a co-surety similarly to compel proof against the bankrupt surety's estate. Moore v. Simms, 257 Fed. 540, 168 C. C. A. 524.

The statute states that if the surety pays the debt in part, he shall be subrogated to the creditor's rights to that extent. Such partial subrogation on partial discharge of the debt seems a violation of fundamental principles of suretyship. See supra, § 1269.

71 In re Oriental Commercial Bank, L. R. 7 Ch. 99. The rule is the same in Germany. Petersen und Kleinfeller, Konkursordnung, 294.

72 See First Nat. Bank v. Eason, 149 Fed. 204, 79 C. C. A. 162.

73 Williams v. United States Fidelity, etc., Co. 236 U. S. 549, 59 L. Ed. 713, 35 Sup. Ct. 289. The contrary decision of Smith v. McQuillin, 193 Mass. 289, 79 N. E. 401, must be regarded as overruled.

§ 1993. Other contingent claims under the Act of 1898.

It also has been finally determined by the United States Supreme Court that the claim of a party to an executory bilateral contract is provable against his bankrupt co-contractor although at the time of filing the petition the latter's obligation was conditional on future performance by the solvent contractor.74 These decisions of the ultimate tribunal make it evident that such previous decisions of lower Federal Courts and State Courts as were based on the assumption that contingent debts as such are not probable must be regarded as overruled. On the other hand, however, if a conditional obligation cannot fairly be valued it is not provable.75

§ 1994. Creditor's right against several bankrupt principals and sureties.

Where any obligor of the creditor remains solvent, the creditor is assured of payment in full; but where all parties to the obligation become insolvent the creditor will suffer loss, unless the aggregate dividends obtainable from the estates of all the debtors amounts to one hundred cents on the dollar. The most favorable course for the creditor if he is allowed to pursue it, is to prove against the insolvent estates of the various obligors for the full amount of his claim, and if the aggregate of dividends on such proofs exceeds one hundred cents on the dollar, rebate the excess or hold it in trust for the sureties on the obligation. If the creditor observes care in the order of proof, this result may be achieved. Payment by a principal debtor operates as a cancellation of the debt, and no action can afterwards be brought against others who may have been bound for the debt,76 and part payment by a principal consequently discharges the debt pro tanto." On the other hand, payment by a surety has no such effect.

74 Central Trust Co. v. Chicago Auditorium, 240 U. S. 581, 36 Sup. Ct. Rep. 412, 60 L. Ed. 811, L. R. A. 1917 B. 580.

75 Dunbar v. Dunbar, 180 Mass. 170, 62 N. E. 248, 94 Am. St. Rep. 623, 190 U. S. 340, 47 L. Ed. 1084, 23 Sup. Ct. 757 (an obligation to pay a

The creditor may sue the divorced wife an annuity as long as she remained unmarried). In re 35% Automobile Supply Co., 247 Fed. 377. 76 Uniform Neg. Inst. Law, Sec. 119, supra, § 1189.

Cook v. Lister, 13 C. B. (N. S.) 543; and see cases cited, infra, n. 80.

principle at law for the full amount,78 or prove in bankruptcy therefor, holding any excess as trustee for the surety.79

§ 1995. Application of principles to parties to negotiable instruments.

These principles find most frequent application where the various parties to a negotiable instrument become bankrupt. Payment by a prior party or principal debtor to such an obligation or a dividend declared on the bankrupt estate of such a party on proof by the creditor before proof against subsequent parties or sureties, must be credited on the proof against the latter; 80 but payment by a subsequent party or surety will not reduce the proof. The creditor may subsequently prove against the prior party or principal debtor for the full amount of his claim, and if more than a hundred cents on the dollar is realized, hold the balance as trustee for the subsequent parties.81

78 Jones v. Broadhurst, 9 C. B. 173; Randall v. Moon, 12 C. B. 261; Williams v. James, 19 L. J. Q. B. 445; Agra &c. Bank v. Leighton, L. R. 2 Ex. 56; Woodward v. Pell, L. R. 4 Q. B. 55; Thornton v. Maynard, L. R. 10 C. P. 695; Andrews v. Toronto Bank, 15 Ont. Rep. 648; Bird v. Louisiana Bank, 93 U. S. 96 (St. of La. not a bar); Davis v. McConnell, 3 McL. 391;. Granite Bank v. Fitch, 145 Mass. 567, 14 N. E. 650, 1 Am. St. Rep. 484; Beals v. Mayher, 174 Mass. 470, 473, 54 N. E. 857, 75 Am. St. Rep. 367; Mechanics' Bank v. Hazard, 13 Johns. 353; Madison Bank v. Pierce, 137 N. Y. 444, 33 N. E. 557, 20 L. R. A. 335, 33 Am. St. 751; Beran v. Tradesmen's Nat. Bank, 137 N. Y. 450, 33 N. E. 593; Concord Granite Co. v. French, 65 How. Pr. 317; Logan v. Cassell, 88 Pa. 288, 32 Am. Rep. 453; Bank of America v. Senior, 11 R. I. 376. See also Negotiable Instr. Law, Sec. 120, supra, § 1191.

79 Johnson v. Kennion, 2 Wils. 262; Walwyn v. St. Quintin, 1 B. & P. 652; Reid v. Furnival, 1 Cr. & M. 538; North Bank v. Hamlin, 125 Mass. 506;

Madison Bank v. Pierce, 137 N. Y. 444, 33 N. E. 557, 33 Am. St. Rep. 751; Ward v. Tyler, 52 Pa. 393.

80 Ex parte Ryswicke, 2 P. Wms. 89; Ex parte Wyldman, 2 Ves. Sr. 115, s. c. 1 Atk. 109; Ex parte Royal Bank, 2 Rose, 197; Re Blakeley, 9 Morrell, 173; Re Weeks, 13 N. B. R. 263; Re Hicks, 19 N. B. R. 299; Re Cram, 1 Hask. 89; Re Hamilton, 1 Fed. Rep. 800; Re Pulsifer, 9 Biss. 487, s. c. 14 Fed. 247; Sohier v. Loring, 6 Cush. 537; Blake v. Amés, 8 Allen, 318; National Bank v. Porter, 122 Mass. 308; Beals v. Mayher, 174 Mass. 470, 472, 54 N. E. 857, 75 Am. St. 367; Bank v. Alexander, 85 N. C. 352, 39 Am. Rep. 702.

81 Ex parte De Tastet, 1 Rose, 10; In re Ellerhorst, 5 N. B. R. 144; Ex parte Talcott, 2 Low. 320; Ex parte Harris, 2 Low. 568; Re Baxter, 18 N. B. R. 497; Re Pulsifer, 9 Biss. 487, 490, s. c. 14 Fed. Rep. 247; Swarts v. Fourth Nat. Bank, 117 Fed. 1, 54 C. C. A. 387; Re Noyes Bros., 127 Fed. 286, 62 C. C. A. 218; Beals v. Mayher, 174 Mass. 470, 54 N. E. 857, 75 Am. St. Rep. 367; Ames v. Huse, 55Mo. App. 422. But see Cooper v.

Nor will payment by the prior party after proof has once been made in full against the subsequent party be ground for diminishing the latter proof.82

A contract right is none the less provable because it is personal in character. Thus a judgment for breach of promise of marriage is provable.83 And it seems that even though not

reduced to judgment before the filing of the petition, the claim would still be provable.84 A right to alimony, however, is neither provable nor dischargeable.85 Nor is a judgment for a fine or statutory penalty.&

86

§ 1997. Claims barred by the Statute of Limitations.

As the Statute of Limitations is a local statute, it frequently happens that a claim may be barred in one State and not in another.87 The Bankruptcy Statute, however, is effective thoughout the United States, and a discharge granted in any district discharges the debt everywhere. If, therefore, a debt barred by limitation in one State is held provable in bankruptcy proceedings anywhere in the United States, the creditor will acquire a right to share in the estate equally with creditors whose claims were not barred, although perhaps as a practical matter had the debtor not become bankrupt, the fact that the creditor's claim was still enforceable in some State or States would never have enabled him to secure a judgment upon it, since the debtor resided elsewhere. On the other hand, if the claim is not provable the debtor's discharge in bankruptcy will be no defence to it. The solution reached is to hold that the debt is provable in character and is discharged whether a dividend is allowable upon it or not, and that no dividend is allowable if the bankruptcy proceedings are in a Federal District where the debt has already become barred by limitation.88

Komar, 234 Fed. 378; Bond v. Milliken, 134 Ia. 447, 109 N. W. 774, 120 Am. St. Rep. 440.

84 By an express exception in the Bankruptcy Act the liability would not be discharged, see supra, § 1982.

85 Audubon v. Shufeldt, 181 U. S. 575, 45 L. Ed. 1009, 21 Sup. Ct. 735; Wetmore v. Markoe, 196 U. S. 68, 49 L. Ed. 390, 25 Sup. Ct. 172.

86 In re Moore, 111 Fed. 145. See also Bancroft v. Mitchell, L. R. 2 Q. B. 549; Ex parte Graves, 3 Ch. App. 642.

Sec. 57 j of the Federal statute provides that debts owing to the United States, a State, county, district, or municipality, as a penalty

or forfeiture, shall not be allowed except for the amount of the pecuniary loss sustained by the transaction out of which the penalty or forfeiture arose, with reasonable and actual costs, and such interest as may have accrued thereon.

87 See infra, § 2002.

88 Re Kingsley, 1 Lowell, 216; Re Cornwall, 9 Blatch, 114; Re Hardin, 1 B. R. 395; Re Reed, 11 B. R. 94; Capelle v. Trinity Church, 11 B. R. 536; Re Nosen, 12 B. R. 422; Re Doty, 16 B. R. 202; Re Lipman, 94 Fed. 353; Re Ray, 1 B. R. 203; Re Sheppard, 1 B. R. 439. See also Nichols v. Murray, 18 B. R. 469.