This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The bankrupt act of 1898 provides: "The liability of a person who is co-debtor with, or guarantor or in any manner a surety for a bankrupt shall not be altered by the discharge of such bankrupt."1 This section is not affected by the amendment of 1903. Accordingly a discharge does not affect the liability of other parties.2 Even in the absence of a specific statute the discharge of one debtor in bankruptcy is not a bar to an action against those who were jointly liable with him on contract.3 Hence the discharge of a maker does not discharge the indorser,* even if the note in question is not proved as a claim against the bankrupt's estate.5 If, however, the surety is held on a bond whereby he is liable only in case judgment is rendered against his principal, strong reasons exist for holding that the surety is not liable if the principal is discharged in bankruptcy, and invokes such discharge in the action in which such bond has been given and thereby prevents judgment from being rendered against him. "The cases are numerous in which it has been held, and we believe correctly, that if one is bound as surety for another to pay any judgment that may be rendered in a specified action, if the judgment is defeated by the bankruptcy of the person for whom the obligation is assumed, the surety will be released. The obvious reason is that the event has not happened on which the liability of the surety was to depend.'" For these reasons the discharge of the principal in bankruptcy has been held to discharge the surety from liability on a capias bond,7 a bond in attachment8 or an appeal bond.9 In other jurisdictions sureties on an attachment bond10 or a bond for re-delivery of goods taken on execution11 are not released by the discharge of their principal in bankruptcy. Some cases reach this result in harmony with the general principles on the subject by holding that a special judgment, pro forma only,12 or a judgment, execution on which is perpetually enjoined13 should be rendered against the bankrupt to fix the liability of the sureties. Discharge of a corporation in bankruptcy does not release the directors from liability for corporate debts,14 nor does it and discharge of a mortgagor does not release a grantee from such mortgagor who has assumed and agreed to pay the mortgage debt.17
Philmon v. Marshall, 116 Ga. 811; 43 S. E. 48; Evans v. Rounsaville, 115 Ga. 684; 42 S. E. 100; Stick-ney, etc., Co. v. Goodwin, 95 Me. 246; 85 Am. St. Rep. 408; 49 Atl. 1039.
11 Frazee v. Nelson, 179 Mass. 456; 88 Am. St. Rep. 391; 61 N. E. 40.
12 Rochester Lumber Co. v. Locke, 72 N. H. 22; 54 Atl. 705.
13 In re Francis-Valentine Co., 93 Fed. 953.
14 Graham v. Richerson, 115 Ga. 1002; 42 S. E. 374.
1 See Sec. 16 of act of 1898.
2 Discharge of debtor does not affect liability of garnishee. Marx v. Hart, 166 Mo. 503; 89 Am. St. Rep. 715; 66 S. W. 260.
3 Sandusky v. Bank. 81 111. 353; Post v. Losey, 111 Ind. 74; 60 Am. Rep. 677; 12 N. E. 121; Edwards v. Coleman, 2 A. K. Mar. (Ky.) 249; National Bank v. Sawyer. 177 Mass. 490; 83 Am. St. Rep. 292; 59 N. E. 76: Linn v. Hamilton, 34 N. J. L. 305; Childs v. Childs, 10 O. S. 339; 75 Am. Dec. 512.
4 National Bank v. Sawyer, 177 Mass. 490; 83 Am. St. Rep. 292; 59 N. E. 76.
5 National Bank v. Sawyer, 177 Mass. 490; 83 Am. St. Rep. 292; 59 N. E. 76.
6 Wolf v. Stix, 99 U. S. 1, 8; quoted in Goyer Co. v. Jones. 79 Miss. 253. 256; 30 So. 651.
7 Bryant v. Kinyon. 127 Mich. 152; 53 L. R. A. 801; 86 N. W. 531; Barber v. Rodgers, 71 Pa. St. 362.
8 Johnson v. Collins. 117 Mass. 343: Braley v. Boomer, 116 Mass. 527.
9 Odell v. Wootten. 38 Ga. 224; Goyer Co. v. Jones. 79 Miss. 253: 30
So. 651; Knapp v. Anderson. 71 X. Y. 466.
10 Flagg v. Tyler. 6 Mass. 33; MeCombs v. Allen. 82 X. Y. 114.
11 Pinkard v. Willis. 24 Tex. Civ. App. 69; 57 S. W. 891.
12 Rosenthal v. Xove. 175 Mass. 559: 78 Am. St. Rep. 512: 56 X. E. 884. (Judgment provided for by statute.)
13 Hill v. Harding, 130 U. S. 699.
14 In re Marshall Paper Co.. 102 Fed. 872: 43 ('. C. A. 38. It does not relieve them in equity. First relieve stockholders from such liability.15 Discharge of a partner does not release his co-partner ;16