Supreme Court touching the point with which we are dealing, we turn now to the adjudications of other Courts upon the question.

3. Patrick McDonald owed H. E. Taylor & Company a debt. As collateral security for the payment thereof, he assigned to said company an insurance policy upon his life. Later the company and other creditors of Patrick McDonald instituted bankruptcy proceedings against him. He offered a composition of twenty per cent. The company, together with a majority of his other creditors, accepted the same. The amount due the company under the composition was paid to the company. The company, however, did not surrender the policy; but, on the contrary, upon the death of McDonald, collected the proceeds thereof. McDonald's administratrix demanded of the company the sum so collected by the company after McDonald's death. The demand was refused. The administratrix, therefore, filed a petition in a New York court setting up the foregoing facts, and seeking recovery against the Company thereon. To the complaint, a demurrer was interposed. Whether a cause of action was stated, was the question carried to the appellate court. On behalf of the company, it was urged that the composition agreement had no further force than an ordinary discharge in bankruptcy, which works, not a a release of the debt itself, but a bar to the remedy. Argument was put forward that acceptance of the composition could be compelled by a majority of the creditors, and, hence, in no real sense, could a composition be looked upon as a consent proceeding. Answering this, the opinion of the court stated that the allegation of the assent of the particular creditor to the composition was expressly made. Therefore, as to it, the composition was voluntary. Taking this position, the Court ruled that the composition operated as a release of the entire debt, and, as a corollary, that the complaint made out a cause of action.3

3 McDonald v. Taylor & Co. (N. Y. App Div.), 26 Am. Bk. R. 635.

4. M. S. Benedict Manufacturing Company was the maker of a certain promissory note. Harry Benedict endorsed the same for the accommodation of the maker. His status as accommodation maker was known to the creditors holding the notes. M. S. Benedict Manufacturing Company went into bankruptcy. The said Company offered a composition to its creditors. The holders of the particular notes were among the creditors of the bankrupt whose consent was necessary to render the composition effective. They consented to the composition, and the same was duly accepted and confirmed. Prior to the making of the offer of composition by the Company (maker as aforesaid), the accommodation endorser (Harry Benedict) was adjudged a bankrupt, and the petitioner in the instant case was elected his trustee. Said trustee did not consent to the acceptance of the composition. Now, claims having been filed by the holders of the notes aforesaid against the bankrupt estate of the accommodation endorser upon the said notes, the trustee petitioned the Court to expunge the claims, on the ground that the consent to the composition given by said holders, as above mentioned, extinguished the debt and left no recovery over against the non-consenting accommodation endorser. The Court held that: Unless the section of the bankruptcy law, which provides that the liability of a co-debtor shall not be altered by the discharge of a bankrupt, applied, the surety would be discharged. This follows from the general rule of law (now crystallized by the Negotiable Instrument Law into positive statutory form) that, if the holder does an act which operates to release the principal, or which impairs the rights or remedies of the surety against the principal, the obligation of the surety will thereby be released. The co-debtor clause is in derogation of the Common Law. It should be strictly construed. It does not provide that the liability of a codebtor shall not be altered by conduct of the creditor which operates to impair the right of a surety. It should not be extended to embrace a case of this kind. Where a dis

charge has been obtained by simple operation of law, and not through the act of the creditor, it applies. Relief under composition cannot be obtained without co-operation of the creditors of the bankrupt proposing the composition. The co-debtor clause, as a consequence, does not apply to compositions, where the creditor complaining consented thereto. Equity demands that a surety, compelled to pay the debt of his principal, shall have the opportunity to indemnify himself to the full measure of the principal's ability to pay. If, in any way, the holder of the claim has cooperated to deprive the surety of said right of indemnity, he has, by such co-operation, released the surety. claims in question were directed to be expunged.*

The

We find two cases which distinctly enunciate a contrary doctrine. The first is from England, the second from Massachusetts.

5. The Master of the Rolls referred the following question of law to the Court of Common Pleas of England for opinion: Whether a creditor of a bankrupt, in signing the certificate of the bankrupt, discharged the legal liability of a surety of the bankrupt on a debt to the creditor. The Court of Common Pleas, speaking through Tindall, C. J., held that such signature did not operate as a discharge to the surety. The Court said: "The signing the certificate where the creditor is satisfied that the bankrupt has conformed to the provisions of the statute, is a moral obligation on the creditor; it is a power vested in him by the act, which he is morally bound to exercise where the truth of the case requires it. The exercise of such power by the creditor cannot be considered as ranging itself under those voluntary acts of the creditor which release the surety." The decision of the court was impelled by the consideration that it is the duty of the surety to pay the debt. If he does pay the debt, the legislature allows him

4 Matter of Harry Benedict, U. S. Dist. Ct. N. Dist. N. Y., 18 Am. Bank R. 604.

to stand in the place of the creditor, and prove the claim himself. In case he does not acquit himself of his duty to pay the debt, and, as a result, is in no position to prove the same himself, it would be a legitimate construction of his laches, to assume that he has consented to the proof of the claim by the creditors, and the concomitant act of signing the certificate of the bankrupt.a

6, Wood and Signourney were the makers of a note. Wood took advantage of the insolvency laws. In order to obtain a discharge as an insolvent (and owing to the fact that his assets did not pay fifty per cent of the claims proved against his estate) Wood had to obtain the assent of a majority of his creditors thereto. To make out the requisite number of consenting creditors, it was essential that the holders of the note above mentioned join in the consent. Said holders did consent. The discharge was granted. Thereafter, having obtained judgment against Signourney, the other maker, the said holders, who were the executors of the original payee, proceeded to enforce the same. Signourney, defended that the holders, by their assent to the insolvency discharge of Wood, had extinguished the debt and released him from his liability thereon.

Chief Justice Shaw ruled that the assent accorded by the holders to Wood's discharge in insolvency did not preclude them from seeking further satisfaction from Signourney. He held that their assent was not to a release of the debt; but to a discharge by operation of law. Their concurrence in the discharge was, of course, a matter of choice on their part. Yet, the conditions of conformity with the law and good faith in the debtor appearing, non-consent by the said holders to the discharge would be "an unjustifiable exercise of their power." The assenting mind of the creditor was not the basis of the force and effect of the insolvency discharge."

4a Browne v. Carr, 7 Bing. 508.

5 Sigourney v. Williams, 1 Gray 623.

We fancy that the above authorities are pretty nearly exhaustive of the cases parallel in point of fact or law to the one before us for consideration. However, before undertaking to discuss and dispose of the problem whose solution we have entered upon, we shall refer to the two clauses of the Bankruptcy Law of 1898, as amended, which most affect the point involved. They are:

7. The confirmation of a composition shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge.

8. Co-debtors of Bankrupts.-a. The liability of a person who is a co-debtor with, or guarantor or in any manner a surety for, a bankrupt shall not be altered by a discharge of such bankrupt.'

We have before us a problem whose nicety lies in the cross-considerations involved in working out the answer thereto. Undoubtedly it is a moot-point of more than academic importance. Undoubtedly lawyers have frequently construed the Bankruptcy Law in this particular and acted upon their construction thereof. Yet no actual case has been produced by the uncertainty that lurks in the question.

The trend of opinion illustrated by the cases abstracted in citations 1 to 4 inclusive, seem to determine rather satisfactorily that a composition differs in effect from a discharge. The element constituting the difference is that of consent. Where the consent of the individual creditor appears, the composition acts as a release of the debt. Despite the high authority of the two judges who rendered the decisions. cited as 5 and 6 above, it would seem that the present position of the courts is such as to ignore the argument of the moral obligation to consent. Moreover, the English case intimates that, under the then effective English law, the

6 U. S. Compiled Statutes A. D. 1913, Sec. 9595.

7 U. S. Compiled Statutes A. D. 1913, Sec. 9600.