written contract prior to its execution by the surety as discharges the principal.22 Any of these defences of the principal might, however, be a defence to the surety if coupled with the further fact that the creditor at the time the surety's contract was entered into knew of the defence, and the surety did not know of it.23

§ 1215. Discharge in bankruptcy of the principal debtor.

In accordance with the principles stated in the previous section, the principal's discharge in bankruptcy does not excuse the surety from liability to the creditor. 24 This is expressly so provided in the Federal Bankruptcy Statute.25 Even though the assent of a majority of his creditors is necessary in order to enable the principal to receive a discharge or to have a composition made effective and the creditor in question has joined in giving such assent, the surety has generally been held not to be released. 26 So far has this been

Owens River Canal Co., 25 Cal. App. 247, 143 Pac. 90; Luce v. Foster, 42 Neb. 818; Weare v. Sawyer, 44 N. H. 198, 205; Holland v. Clark, 67 N. Car. 104; Dickerman v. Bowman, 14 Wis. 388, and infra, §§ 1244 et seq.

22 See infra, § 1898.

23 See extract from Stewart v. Behm, 2 Watts, 356, supra, n. 21.

24 Ex parte Williamson, 1 Atk. 82; Browne v. Carr, 7 Bing. 508; Moody v. King, 2 B. & C. 558; Inglis v. Macdougal, 1 Moore, 196; London Assurance Co. v. Buckle, 4 Moore, 153; Wolf v. Stix, 99 U. S. 1, 25 L. Ed. 309; Knapp v. Anderson, 15 N. B. R. 316; Phillips v. Wade, 66 Ala. 53; Jones v. Hawkins, 60 Ga. 52; Lackey v. Steere, 121 Ill. 598, 13 N. E. 518, 2 Am. St. Rep. 135; Post v. Losey, 111 Ind. 74, 12 N. E. 121, 60 Am. Rep. 677; Burtis v. Wait, 33 Kans. 478, 6 Pac. 783; Serra v. Hoffman, 30 La. Ann. 67; Cochrane v. Cushing, 124 Mass. 219; Wolfboro Loan, etc., Co. v. Rollins, 195 Mass. 323, 81 N. E. 204; Robinson v. Soule, 56 Miss. 549; Claflin v. Cogan, 48 N. H. 411; Linn v. Hamilton, 34 N. J.

L. 305; Hall v. Fowler, 6 Hill, 630; Wilson v. Field, 27 Hun, 46; Bank v. Simpson, 90 N. C. 467; Noble v. Scofield, 44 Vt. 281. Similarly where the principal, a corporation, is dissolved and under the statute its liability and that of its contributories discharged, the surety remains liable. In re Fitz George, [1905] 1 K. B. 462. 25 Sec. 16.

26 Browne v. Carr, 7 Bing. 508; Megrath v. Gray, L. R. 9 C. P. 216; Ellis v. Wilmot, L. R. 10 Exch. 10; Ex parte Jacobs, L. R. 10 Ch. 211 (overruling Wilson v. Lloyd, L. R. 16 Eq. 60); Simpson v. Henning, L. R. 10 Q. B. 406; Re Burchell, 4 Fed. 406; Guild v. Butler, 122 Mass. 498, 23 Am. Rep. 378; Neslor v. Grove (N. J. Eq.), 107 Atl. 281 (the court held the surety impliedly assented to the discharge); Mason & Hamlin Co. v. Bancroft, 1 Abb. N. C. 415; Hill v. Trainer, 49 Wis. 537, 5 N. W. 926. But see contra, Re McDonald, 14 N. B. R. 477; Calloway v. Snapp, 78 Ky. 561; Unino Nat. Bank v. Grant, 48 La. Ann. 18, 18 So. 705. But where a creditor

carried that even where it was found as a fact that except for the plaintiff's assent the bankrupt would not have received a discharge, the surety has been held liable. Except as this last result may be required by express language in a Bankruptcy Statute, it seems somewhat difficult to support and to reconcile with decisions holding that the voluntary participation by the creditor in a foreign bankruptcy, whereby the discharge of the principal becomes binding on the creditor, discharges the surety.28

§ 1216. Discharge of the principal in bankruptcy may prevent performance of a condition of the surety's liability. Though the mere discharge in bankruptcy of the principal does not discharge the surety, it should be observed that the surety's obligation may be subject to an express condition which precludes enforcement of the debt against him after the discharge of the principal. Thus a bond given to discharge an attachment is generally conditioned on the payment of any judgment which may be recovered against the principal. If, therefore, no judgment can be recovered against the principal because he has been discharged, it necessarily follows that the surety escapes liability. To avoid this difficulty some courts have, without the aid of a procedural statute authorizing it, given judgment against the principal with a perpetual stay of execution, 29 thereby satis

secretly bargained for a greater proportion of his claim than other creditors were to receive, this not only deprived him of all right against the debtor but also against a surety for the debtor, though the composition deed expressly reserved rights against sureties. Mayhew v. Boyes, 103 L. T. (N. S.) 1.

27 Cilley v. Colby, 61 N. H. 63. 28 Third Nat. Bank v. Hastings, 134 N. Y. 501, 505, 32 N. E. 71; Phelps v. Borland, 103 N. Y. 406, 9 N. E. 307, 57 Am. Rep. 755.

29 Re Martin, 105 Fed. 753; Re Albrecht, 17 N. B. R. 287; Hill v. Harding, 116 Ill. 92, 4 N. E. 361; Kendrick v. Warren, 110 Md. 47, 76, 72 Atl.

461, 465; Fisse v. Einstein, 5 Mo. App. 78; Zollar v. Janvrin, 49 N. H. 114, 6 Am. Rep. 469; Batchelder v. Putnam, 54 N. H. 84, 20 Am. Rep. 115; Holyoke v. Adams, 1 Hun, 223; Farrell v. Finch, 40 Ohio St. 337. Where, however, the attachment was made within four months the court refused to enter a judgment with stay of execution against the principal debtor in order to charge sureties on the attachment bond, in House v. Schnadig, 235 III. 301, 85 N. E. 395; Crook-Horner Co. v. Gilpin, 112 Md. 1, 75 Atl. 1049, 28 L. R. A. (N. S.) 233, 136 Am. St. Rep. 376, (see also Klipstein v. AllenMiles Co., 136 Fed. 385, 69 C. C. A.

fying the condition of the surety's obligation without doing more than technical violation to the principal debtor's discharge; and the Supreme Court of the United States has held that rendering such a judgment is not inconsistent with the protection given by the Bankruptcy Law to a discharged bankrupt.30 Other States, however, have refused to give such a qualified judgment against the principal debtor in the absence of an express local statute authorizing it.31 Somewhat similar cases may arise in regard to directors or stockholders who are made by statute, under certain circumstances, sureties for the debts of the corporation. If a State statute requires as a condition of the liability of a director that judgment shall first be obtained against the corporation and execution be returned unsatisfied, it seems impossible to comply with this condition if the corporation obtains a discharge in bankruptcy.32

§ 1217. Illegality of the contract with the principal as a defence to the surety.

The general reason for denying recovery in illegal con

229); since under the Bankruptcy Statute such an attachment would have been dissolved by bankruptcy, and the court declined to give its aid to hold the surety on the bond bound to satisfy a judgment which could not have been satisfied from the attached property if no bond had been given to dissolve the attachment.

30 Hill v. Harding, 130 U. S. 699, 32 L. Ed. 1084.

31 Wolf v. Stix, 99 U. S. 1, 25 L. Ed. 309; Klipstein v. Allen-Miles Co., 136 Fed. 385, 69 C. C. A. 229; Odell v. Wootten, 38 Ga. 224; Payne v. Able, 7 Bush, 344, 3 Am. Rep. 316; Carpenter v. Turrell, 100 Mass. 450; Barnstable Savings Bank v. Higgins, 124 Mass. 115; Goyer Co. v. Jones, 79 Miss. 253, 30 So. 651; Martin v. Kilbourn (Tenn.), 1 Cent. L. J. 94. In Massachusetts the Statute of 1875, Chap. 68, enabled judgment to be given against the sureties though the principal had been discharged in bankruptcy. See

Fickett v. Durham, 119 Mass. 159; Barnstable Savings Bank v. Higgins, 124 Mass. 115.

32 In Train v. Marshall Paper Co., 180 Mass. 513, 62 N. E. 967, the court held the discharge of the corporation barred relief against the directors. Cf. Way v. Barney, 116 Minn. 285, 133 N. W. 801, 38 L. R. A. (N. S.) 648, Ann. Cas. 1913 A. 719; Wood v. Vanderveer, 55 N. Y. App. Div. 549, 67 N. Y. S. 371. By amendment to Sec. 4 (b) of the Federal statute after the decision in Train v. Marshall Paper Co., supra, it was provided that "The bankruptcy of a corporation shall not release its officers, directors, or stockholders, as such, from any liability under the laws of a State or Territory of the United States." It is difficult, however, to see how the Federal Bankruptcy Statute can change the conditions which the local law may impose qualifying the liability of directors and stockholders.

tracts is not so much the illegality of the contract as the illegality of the plaintiff.33 A creditor, therefore, tainted with illegality in his contract with the principal of a kind which would prevent recovery against the latter is subject to the same defence when endeavoring to enforce the surety's obligation.34 What illegality is of this sort and when it is so directly connected with a contract as to make it unenforceable is elsewhere considered.35 Even though the illegality would not totally destroy the principal's liability, if it impairs in any way the surety's position, and was not known to him he will be discharged.35 It is, however, to be observed that where the non-enforcement of an illegal contract would impose a penalty on those intended to be protected by the law, the obligation will be enforced; 356 and this principle finds illustration in official bonds, required for the security of those to whom the principal on the bond is or may be liable in his official capacity. Though such a bond may be taken in a form forbidden by law, not only the principal but the sureties will be liable.35c

33 See infra, § 1630.

34 United States v. Tingey, 5 Pet. 115, 8 L. Ed. 66; State v. Brantley, 27 Ala. 44; United States Fidelity &c. Co. v. Charles, 131 Ala. 658, 31 So. 558, 57 L. R. A. 212; First Nat. Bank v. Clark's Est., 59 Colo. 455, 149 Pac. 612; Ferry v. Burchard, 21 Conn. 597; William-Hester Marble Co. v. Walton (Ga. App.), 96 S. E. 269; Thompson v. Buckhannon, 2 J. J. Marsh. 416, 419; Leckie v. Scott, 10 La. 412; Gorham v. Keyes, 137 Mass. 583; Boylston Bottling Co. v. O'Neill, 231 Mass. 498, 121 N. E. 411; Crum v. Wilson, 61 Miss. 233; Harley v. Stapleton, 24 Mo. 248; Swift v. Beers, 3 Denio, 70; Morse v. Hovey, 9 Paige, 197; Basnight v. American Mfg. Co., 174 N. C. 206, 93 S. E. 734; Russell v. Failor, 1 Oh. St. 327, 59 Am. Dec. 631; Hartford Township Board v. Thompson, 33 Ohio St. 321; Zurn v. Mitchell (Tex. Civ. App.), 196 S. W. 544. In Citizens' Trust Co. v. Tindle, 272 Mo. 681, 199 S. W. 1025,

the obligation was held binding on the surety to the extent that the transaction was legal, though it was partially illegal.

35 See infra, §§ 1628 et seq. In the following cases the illegal acts of the principal were held not so directly connected with the obligation in question as to give the surety a defence. TriBullion Smelting &c. Co. v. McLean, 61 Colo. 80, 156 Pac. 133; Eagle Roller Mill Co. v. Dillman, 67 Minn. 232, 69 N. W. 910.

35% In Lott v. Peterson (Ga. App.), 98 S. E. 361, and Duckett v. Martin (Ga. App.), 99 S. E. 151, a surety on a note containing waiver of homestead exemption was held to be discharged by a secret usurious payment of interest which invalidated the waiver of exemption.

356 See infra, § 1632.

35c This was so held in regard to the bond of a bank cashier in Citizens' Trust Co. v. Tindle, 272 Mo. 681, 199

§ 1218. Duress or fraud practiced on the principal.

36

If the creditor has procured the obligation of the principal debtor by duress or fraud the latter's promise may be absolutely void or it may be only voidable. Moreover, the terms of the surety's promise may be either to pay what the principal owes, or to pay a fixed sum, which it is supposed the principal owes. If the principal's obligation is absolutely void, the surety should be free, whichever of these forms his promise may have taken. Even though he may be unable to deny that he has contracted or that by the strict terms of his contract performance is due from him, he should be relieved, for if he is held liable one of two consequences must follow: either his right over against the principal debtor owing to the creditor's fault will be less effectual than it should be, or the principal debtor will be forced to pay and thus indirectly satisfy the creditor on a void obligation. If the duress or fraud merely makes voidable the principal's obligation, the situation is different, for it cannot be certain that the principal will not affirm the transaction and waive his personal defence. If the surety's promise is merely to pay what the principal owed, this should be understood to mean what the principal unavoidably owed, and not to include claims which the principal unnecessarily assumed. But if the surety's promise is in the second form suggested, there seems no reason why the surety should be excused if the principal chooses to affirm the transaction. These distinctions are not clearly brought out in the cases. An early decision " held that duress of the principal was no defence to the surety and this decision has been frequently followed 38 without any nice observance of the terms

S. W. 1025. The court said of the bond: "Its failure to conform to the statutory requirements will not affect its validity for the purpose for which it was made. It was voluntarily entered into and its conditions may be performed without a breach of the law. The sureties are therefore bound by the terms of their agreement, as recited in the bond, except as to such parts as may be illegal, when their responsibility will continue as to the

residue. Daniels v. Tearney, 102 U. S. 415, 420, 26 L. Ed. 187; Kountze v. Hotel Co., 107 U. S. 378, 396, 27 L. Ed. 609, 2 Sup. Ct. 911; Leggett v. Humphreys, 21 How. 66, 16 L. Ed. 50.” 36 See infra, §§ 1488, 1622.

37 Huscombe v. Standing, Cro. Jac. 187.

38 Hazard v. Griswold, 21 Fed. 178; Wayne v. Sands, Freem. 351, S. C. Warn v. Sandown, 3 Keb. 238; McClintick v. Cummins, 3 McL. 158;