when the surety is aware that the debt may be larger than his undertaking, and guarantees the debt, limiting his own liability to a certain sum, he has no equity to receive any part of the dividend, because, as the courts say, that equity depends on his guaranteeing a certain debt, which he has a right to suppose will not be exceeded. This distinction seems somewhat nice, but has been adopted by an able judge in this country.2

If the surety becomes responsible for part of a debt because he is interested to that extent in the adventure, he is equitably a principal, and has no right of substitution.

3

§ 198. Amount of Proof; Interest. All debts are to be proved as of the same date. Interest is to be reckoned to that day on all debts which bear interest, or on which interest would be ordered to be assessed by a jury. If the debt is not payable at the date of the bankruptcy, and does not bear interest, a rebate is to be made at such rate as the law governing the contract, construed with reference to the contract itself, requires. The English practice was formerly embarrassed in the allowance of interest by the inability of the courts to assess damages; but that has been corrected by statute, and their law is now substantially like ours, excepting that when there is no agreement for interest the rate is to be four per cent. In the English practice the rebate is made from the dividend instead of the proof.7

§ 199. Proof for less than Actual Debt. In the case of the principal debtor himself proof is, in a certain sense, the equivalent of payment; and an unsecured creditor, as we have seen,

1 Ellis v. Emmanuel, 1 Ex. D. 157.

2 Dumont v. Fry, 14 Fed. Rep. 293.

5 Act of 1867, § 19; 14 Stat. 525; R. S. § 5067; Re Orne, 1 N. B. R. 57, Fed. Cas. No. 10,581; Robson, 7th

3 Liverpool Bank v. Logan, 5 H. & ed., p. 241; Act of 1898, § 63 (1);

N. 464.

4 Re Murray, 6 Paige, 204; Brown v. Lamb, 6 Met. 203; Prichett v. New bold, Saxton, 571; Sloan v. Lewis, 22 Wall. 150; Re Orne, 1 Ben. 361, Fed. Cas. No. 10,581. [A surety who has paid the debt may prove for interest also. Re Evans, 4 Manson, 114.]

infra, § 526.

6 B. A. 1883 (46 & 47 Vict., c. 52), schedule 2, § 20, re-enacting earlier laws since 1849.

7 Ib. § 21, which is also a re-enactment. [Interest runs to the date of the receiving order. Re Bonacino, 1 Manson, 59.]

shall not prove against his estate more than the actual debt, though he may hold a legal obligation for more. In no other way can the equality of creditors be carried out.

Proof for less than could be recovered has been required in some few cases of penalties, as where assignees neglecting to deposit money, or banks refusing their bills, were chargeable with a very high rate of interest; on the bankruptcy of an assignee or the bank, the proof was admitted only with ordinary interest.1

§ 200. Creditor may hold his Full Security. It is to be noted that a debtor has a right to give his creditor specific property to any amount as security, and where this security is in the form of notes or bonds secured by mortgage, the creditor may have his full share of the property according to the tenor of his notes or bonds, until he receives payment of his actual debt. Indeed, this rule stands on precisely the ground of that stated in § 194, namely, that the creditor is to have the full benefit of all his collateral securities.

§ 201. Double Proof; Creditor and Surety. - Equality among the creditors requires that the same debt should be proved but once against the same estate; and, therefore, when the holder of a bill or other creditor has proved, a surety paying the remainder cannot prove in any form;2 and if both principal and surety are bankrupt, the assignees of the surety are in the same situation. If the solvent surety pays the debt, he is subrogated to the creditor's proof; and if the assets of the two bankrupt estates pay the creditor in full, the assignees of the surety are subrogated for future dividends against the principal debtor, until their estate receives the amount which it has paid the creditor in dividends.

1 Atlas Bank v. Nahant Bank, 3 Met. 581. See Wallis v. Smith, 21

Ch. D. 243.

2 Ex parte Marshal, 1 Atk. 129; Cummings v. Thompson, 7 Met. 132; Re Morse, 11 N. B. R. 482, Fed. Cas. No. 9853; Ex parte Read, 1 Gl. & J. 224; Baines v. Wright, 15 Q. B. D. 102.

This being the limit of

8 Ex parte Marshal, 1 Atk. 129; Rigby v. Macnamara, 2 Cox, 415.

Ex parte Rushforth, 10 Ves. 409; Robson, 7th ed., p. 304; Act of 1867, § 19; 14 Stat. 525; R. S. § 5070; Act of 1898, § 57 i, infra, § 526.

5 Ex parte Johnson, 3 De G. M. & G. 218; Ex parte Greenwood, Buck, 237; Ex parte Solarte, 3 Dea. & Ch. 419.

their right, if the assignees or the principal pay this amount to the assignees of the surety, the latter cannot prove against the estate of the principal.1

If a debt has been proved, the creditor cannot, in addition, prove the liability arising out of a collateral covenant for its security, though such a liability, by itself considered, be provable by the very terms of the statute.2

§ 202. Proof against both Joint and Separate Estates. - In England, it was held that the rule against double proof deprived a creditor who held the joint and several promises of partners from proving against both estates. But the joint and separate estates of partners are settled as if they were wholly distinct; and to reject proof against one, when the creditor holds the obligation of both, is unjust. A false analogy between the proof of a debt and a judgment against solvent persons was one of the reasons given for the doctrine. This rule, though followed, was condemned by many eminent judges in England, but was affirmed by the House of Lords on the principle of stare decisis,5-a principle which it is one of the great privileges of that high court to disregard when the law has been misunderstood by the inferior tribunals.

The rule has been changed by statute in respect to express contracts, but the courts still follow the old doctrine in cases not within the language of the act, such as debts arising ex delicto.7

In the United States, one who has the joint and separate

1 Ex parte European Bank, L. R. 7 Ch. 99.

2 Deering v. Bank of Ireland, 12 App. Cas. 20, reversing Re Killen, Ir. L. R. 15 Ch. 388.

8 Ex parte Rowlandson, 3 P. Wms. 405; Ex parte Bond, 1 Atk. 98; Ex parte Blankenhagen, Cooke, 7th ed., 259; Ex parte Moult, 2 Dea. & Ch. 419; Ex parte Bevan, 10 Ves. 107; Ex parte Bank of England, 2 Rose, 82; Ex parte Husbands, 2 Gl. & J. 4; Ex parte Hinton, De G. 550; Ex parte Goldsmid, 1 De G. & J. 257.

obligation of partners may prove against all the estates of the parties bound to him, treating the firm as distinct from its several partners.1

§ 203. Double Proof; Breach of Trust. When a partner has committed a breach of trust by lending to his firm money which belongs to him as a trustee, and his partners have knowledge of the wrong, they are joint and several wrongdoers, and the cestui que trust may in this country prove against the joint and against each separate estate. They could have so proved in England but for the rule mentioned in the last preceding section, which required them to elect, and by the latest statute and rules they may prove against the joint and separate estate of the trustee.3

If the other partners are ignorant of the breach of trust, the firm are mere joint debtors for money lent, and the trustee for breach of trust; the separate estates of the innocent partners are not liable. This rule will apply in the United States.

§ 204. Double Proof; Exchanged Notes and Bills. If A. and B. exchange notes for an equal amount, for mutual accommodation, and each indorses and negotiates the note of the other, and both become bankrupt, there can be proof by bona fide holders against both estates, amounting to a double proof against both. But if only A. is bankrupt, and B. has not negotiated A.'s note, B. must take up his own note before he can

1 Re Farnum, 6 Law Reporter, 21, Fed. Cas. No. 4674; Ex parte Babcock, 3 Story R. 393, Fed. Cas. No. 696; Borden v. Cuyler, 10 Cush. 476, per Cushing, J.; Fuller v. Hooper, 3 Gray, 334; Meade v. Nat. Bank Fayetteville, 6 Blatch. 180, Fed. Cas. No. 9366; Emery v. Canal Bank, 3 Cliff. 507, Fed. Cas. No. 4446; Re Bradley, 2 Biss. 515, Fed. Cas. No. 1772; Re Howard, 4 N. B. R. 571, Fed. Cas. No. 6750; Stephenson v. Jackson, 9 N. B. R. 255, Fed. Cas. No. 13,374; Re Foot, 8 Ben. 228, Fed. Cas. No. 4906; Ontario Bank v. Chaplin, 20 Can. S. C. 152; Ex parte Nason, 70 Maine, 363; Hill v. Cornwall (Ky.), 26 S. W. 540, contra.

2 Be Tesson, 9 N. B. R. 378, Fed. Cas. No. 13,844; Re Baxter, 18 N. B. R. 62, Fed. Cas. No. 1119; Re Jordan, 2 Fed. Rep. 319.

3 Baring's Case, 1 Mer. 611; Ex parte Watson, 2 Ves. & B. 414; Ex parte Heaton, Buck, 386; Ex parte Poulson, 1 De G. 79; Ex parte Burton, 3 M. D. & De G. 364 ; Ex parte Woodin, ib. 399; Wright's Case, 6 De G. M. & G. 795; Front's Case, ib. 801; Re Norris, L. R. 4 Ch. 280; Ex parte Adamson, 8 Ch. D. 807; Ex parte Geaves, 8 De G. M. & G. 291; Re Parker, 4 Morrell, 135.

prove A.'s; else there would be double proof without the excuse that the creditor is a holder for value; and it has been held that even B.'s assignee cannot prove on A.'s note under similar circumstances, which is much more doubtful, because one note is a good consideration for the other, and the true equities between the estates could be best worked out in many cases by an adjustment of the dividends.3

It was held by Lord Loughborough that where there were outstanding in the hands of the creditors exchanged bills against both estates, though unequal in amount, no proof could be made by either estate against the other, except for the cash balance, rejecting all bills on both sides. This case has been a subject of much discussion and misunderstanding; some courts and writers having apparently inverted the maxim, and laid down that the cash balance could always be proved. In two late cases, however, it has been held that paper is to be rejected from the account, if at all, only when it is purely exchanged paper between the parties bankrupt, the court saying that the true and only test in such cases is, whether an action could be maintained for the balance sought to be proved.5 Therefore, where bills have been given for part of a cash balance they must go to diminish the balance pro tanto; and where bills were owned by bankrupts whose firm contained one member different from the firm that exchanged the bills, they could prove them, though the other bills were outstanding. And where the exchanged paper has been indorsed without recourse, so that double proof cannot be made against one estate, the notes or bills for which that estate is primarily liable may be proved against it by the assignees of the other, the exchange being a good consideration for them.6

1 Sarratt v. Austin, 4 Taunt. 200, 2 Rose, 112; Ex parte Everett, Ex parte Brown, Ex parte Ward, 2 Rose, 113, note; Ex parte Bloxham, 8 Ves. 531; Ohio L. & T. Co. v. Winn, 4 Md. Ch. 253.

2 Ex parte Solarte, 3 Dea. & Ch. 419. 3 Commissioner Williams of Massachusetts, once Chief Justice of the Common Pleas, so held in an unreported case.

4 Ex parte Walker, 4 Ves. 373. See Ex parte Earle, 5 Ves. 833; Ex parte Rawson, Jac. 274; Ex parte Metcalfe, 11 Ves. 404; Byles on Bills, 13th ed., p. 451.

5 Ex parte Macredie, L. R. 8 Ch. 535 ; Ex parte Cama, L. R. 9 Ch. 686; Ex parte Read, 1 Gl. & J. 224.

See Ex parte Solarte, 3 Dea. & Ch. 419; Ex parte Greenwood, Buck, 237.