bankrupt and his privies nor an encumbrancer or purchaser whose title is subsequent to that of the proving creditor can take advantage of it, but on the contrary the assignees may be subrogated to the right and lien of the security, as against the inferior title. Third persons may have an equity to be subrogated to the waiver; as if the assignees take property upon which a judgment creditor has a lien, and he proves his debt, the waiver will enure to the benefit of the sheriff, who would otherwise have been responsible for not completing the levy.3 So a proof of the debt may be a waiver of the right to disaffirm a voidable sale; but if action has been begun against the third person before the proof is made, it is not a waiver. The courts require unequivocal evidence that the debt has been proved in full, as a waiver of security is not to be presumed.5 And, as we have already seen, a proof which has been unadvisedly made may be withdrawn or modified when no new rights have intervened.

The French code declares that secured creditors who vote upon a concordat thereby renounce their security. Upon the construction of this Article most writers agree that if the concordat should fail to be accepted, still the creditors have lost their security, upon the ground that the failure may have been caused by their own votes. If the concordat is annulled by the courts, the rule is otherwise; all creditors are then remitted to their former rights.7

1 Davis v. Winn, 2 Allen, 111; Cook v. Farrington, 104 Mass. 212; Bassett v. Baird, 85 Penn. St. 384; Simmons Co. v. Kaufmann, 8 S. W. Rep. 283 (Tex.); Yates v. Dodge, 13 N. E. Rep. 847 (Ill.); Smith v. Brainerd (Minn.), 35 N. W. Rep. 271.

2 Wallace v. Conrad, 7 Phila. 114, 3 Brewst. 329, 3 N. B. R. 41; Cracknall v. Janson, 6 Ch. D. 735; Hiscock v. Jaycox, 12 N. B. R. 507, Fed. Cas. No. 6531.

395.

3 Ansonia Co. v. Babbitt, 74 N. Y.

4 See Ormsby v. Dearborn, 116 Mass. 386; Seavey v. Potter, 121 Mass. 297; Hotchkiss v. Hunt, 49 Maine, 213; Moller v. Taska, 87 N. Y. 166.

5 Hatch v. Seeley, 37 Iowa, 493; Re Axtell, 14 L. T. N. s. 260.

6 Supra, § 217. Curtis v. Williamson, L. R. 10 Q. B. 57.

7 Alauzet, No. 2663.

CHAPTER XIV.

DISCHARGE.

§ 423. Conditions on which a Discharge is Granted. - It is a part of all bankrupt laws at present to grant a discharge to the debtor if his case comes within certain conditions prescribed by the statute. The moral right of the legislature to release a debt without full payment rests upon a public policy by which the creditors are supposed to lose nothing except a bare right to keep their debts against one who would never be in a position to pay them, if he were not released; while, on the other hand, an honest but unfortunate debtor is restored to usefulness by being permitted to renew his trade.

Such being the theory of the discharge, the legislature may prescribe what conditions it pleases and its grant may be made to depend upon acts or omissions of the debtor before it was passed; but the courts always hesitate to give such a law a retroactive operation when the prohibited act, such as a preference, was not fraudulent at common law.2 On the other hand an amendment which, in general terms, requires a greater number of creditors to assent to the discharge, or varies the requirements in any other way, is construed to apply to pending cases; and so of a law making the discharge conclusive.3

1 See per Lord Cranworth, Ex parte Rufford, 2 De G. M. & G. 234, 241; Ex parte Curties, ib. 255, 262,

2 Davis v. Reynolds, 10 Johns. 442; Re Rosenfield, 1 N. B. R. 575, Fed. Cas. No. 12,058; Re Murdock, 1 Lowell, 362, Fed. Cas. No. 9939; Gove v. Law rence, 26 N. H. 484; Re Keefer, 4 N. B. R. 389, Fed. Cas. No. 7636.

3 Ex parte Lane, 3 Met. 213; Eastman v. Hillard, 7 Met. 420; Re Bartlett, 8 Met. 72; Eddy v. Ames, 9 Met. 585; Kempton v. Saunders, 130 Mass. 236; Upham v. Raymond, 132 Mass. 186; Re Griffiths, 2 Lowell, 340, Fed. Cas. No. 5825; Re King, 3 Dillon, 3, Fed. Cas. No. 7781; Re Perkins, 6 Biss. 185, Fed. Cas. No. 10,983; Re Cerf, 11 N. B. R.

§ 424. Grant of Discharge not Discretionary. When a discharge could be collaterally impeached, it was the practice of the chancellor to grant it in doubtful cases, if he saw no equitable ground to refuse it, because a negative decision was final, while an affirmative one was only provisional. The court of bankruptcy at present decides the question for all the world," and of course must do so upon its best judgment, however difficult the decision may be; and unless discretion is specially given in the statute, none will exist.

By the English Act of 1883 some discretion is given to the court of bankruptcy to grant, refuse, or suspend the order for discharge, and even to revoke it subject to conditions as to his future income or acquisitions; but there is no discretion to grant a discharge if certain acts or omissions are proved against the debtor.

§ 425. Reviewing or Recalling Discharge. By the law of 1867 the court of bankruptcy which had granted a discharge could annul it upon the application within two years thereafter of creditors whose debts were provable in the cause, upon evidence that the discharge had been fraudulently obtained, and that the petitioners had no knowledge of the fraud before the discharge was granted.5

Few questions received judicial determination under this section. That the discharge had been "fraudulently obtained" might seem to refer only to some deceit practised upon the court in obtaining it; but the better opinion was that the statute referred to any fraud which would have been a valid objection to the discharge. It was understood, too, I apprehend, that a knowledge of the fraud by the petitioners in order to defeat

143, Fed. Cas. No. 2556; Re Jones, 12 N. B. R. 48, Fed. Cas. No. 7452; but see Re Francke, 7 Ben. 420, Fed. Cas. No. 5046; Re Sheldon, 8 Ben. 67, Fed. Cas. No. 12,747.

1 Ex parte Hall, 1 Rose, 2; Ex parte Joseph, ib. 184; Ex parte Kennet, ib. 331, 1 Ves. & B. 193; Ex parte Bryant, 1 Gl. & J. 206; Ex parte Stevens, Buck, 389; Ex parte Enderby, 5 Mad. 76.

2 Infra, § 427.

their application, must not only have been before the precise date of the certificate, but before it was practically too late to take advantage of the knowledge, that is, the return day of the bankrupt's application for a discharge. Another fair question would be whether if an issue of fraud had been raised and fairly tried upon the objection of certain creditors in the former proceedings, other creditors, who happened not to know of the trial, could aver their ignorance; that is, whether the issue once tried was not tried for all creditors.2

It has been held that the bar of two years is absolute and the time is not enlarged by a failure of the petitioning creditor to discover the fraud within the two years.3

Besides any power directly given by the statute, courts of bankruptcy have authority as an incident of their jurisdiction, to correct their records so as to conform to the truth in the matter of discharge as in others. They may even recall a discharge granted by accident or mistake, or obtained by a fraud upon the court if there is no other remedy. Such a reversal must be sought promptly, before the rights of innocent third persons who have dealt with the bankrupt since his discharge have become involved.

The court

§ 426. Withdrawal of Application for Discharge. may for cause permit a bankrupt to withdraw his application for a discharge and file a new one; 7 or may even review its decision against him upon a new state of facts; or may annul the bankruptcy, or assent to a composition after the discharge has been once refused. Though these things should be done cautiously, and upon sufficient reasons, they are not open to the objection that third persons may be injured. The only

1 Re Fowler, 2 Lowell, 122, Fed. Cas. No. 4999.

2 See Beekman v. Wilson, 9 Met. 434; Wales v. Lyon, 2 Mich. 276; Buckner v. Calcote, 28 Miss. 432; Chapman v. Forsyth, 2 How. 202; Humphreys v. Swett, 31 Maine, 192.

3 Mall v. Ullrich, 37 Fed. Rep. 653; but see Nicholas v. Murray, 18 N. B. R. 469, Fed. Cas. No. 10,223.

4 In re Dupee, 6 N. B. R. 89; 2 Lowell, 18, Fed. Cas. No. 4183.

5 Ex parte Tallis, 1 Ball & B. 321; s. c. 1 Rose, 371; Ex parte Cawthorne, 2 Rose, 186; Anon. 2 Rose, 187, note.

6 Ex parte Buchstein, 9 Ben. 215, Fed. Cas. No. 2076.

7 Re Svenson, 9 Biss. 69, Fed. Cas. No. 13.659; Ex parte Wallis, 8 Morrell, 110.

persons affected by a discharge are the bankrupt and his creditors existing at the date of the bankruptcy and so long as the case is in court, the creditors must know that a decree of discharge is possible. They should, of course, have full opportunity to be heard on the subject.

§ 427. Decree of Discharge Conclusive. When bankruptcy was dealt with in England by the Lord Chancellor assisted by commissioners, while the discharge or certificate as it was called could not be collaterally impeached for mere irregularity, yet the facts of trading and act of bankruptcy might be inquired of by a jury in a collateral action, which often worked out the same result and was still oftener expensive and vexatious. This inconvenient practice has now been done away; and the discharge is conclusive in England in all collateral actions.1

In this country the tendency of decision has always been to hold the discharge conclusive, though some statutes unwisely permitted fraud to be proved in answer to a plea of discharge.3 Under the Act of 1867 and several others the omission of a creditor from the schedule does not exempt his debt, and that it was done fraudulently cannot under several acts be set up in opposition to the plea, and this rule has been adopted by

1 Gill v. Barron, L. R. 2 P. C. 157; Wadsworth v. Pickles, 5 Q. B. D. 470; Bankruptcy Act, 1883, § 30, cl. 3.

2 See Simms v. Slacum, 3 Cranch, 300; Ammidon v. Smith, 1 Wheat. 447; Cunningham v. Bucklin, 8 Cow. 178; Lester v. Thompson, 1 Johns. 300; Sheets v. Hawk, 14 S. & R. 173; Fritts v. Doe, 22 Penn. St. 335; Stanton v. Ellis, 15 N. Y. 575; Soule v. Chase, 39 N. Y. 342; Morrison v. Woolson, 23 N. H. 11, 29 N. H. 510; Kempton ». Saunders, 130 Mass. 236; Rowev. Page, 54 N. H. 190; Richards v. Nixon, 20 Penn. St. 19; Blake v. Bigelow, 5 Ga. 437; Peterson v. Speer, 29 Penn. St. 478; State v. Bethune, 8 Ired. 139; Suydam v. Walker, 16 Ohio, 122; Card v. Walbridge, 18 Ohio, 411; Wright v. Watkins, 2 G. Greene (Iowa), 547.

8 Burnside v. Brigham, 8 Met. 75; Williams v. Coggeshall, 11 Cush. 442;

Burpee v. Sparhawk, 108 Mass. 111; Way v. Howe, ib. 502; Black v. Blazo, 117 Mass. 17; Fuller v. Pease, 144 Mass. 390; Brown v. Cov. Mut. L. I. Co., 86 Mo. 51; Talbott v. Suit, 68 Md. 443; Stetson v. Bangor, 56 Maine, 274; Corey v. Ripley, 57 Maine, 69; Bailey v. Corruthers, 71 Maine, 172; Alston v. Robinett, 9 N. B. R. 74, 37 Tex. 56; Linn v. Hamilton, 34 N. J. Law, 305; Ocean Bk. v. Olcott, 46 N. Y. 12; Payne v. Able, 7 Bush, 344; Parker v. Atwood, 52 N. H. 181; Thurmond v. Andrews, 10 Bush, 400; Stevens v. Brown, 49 Miss. 597; Beardsley v. Hall, 36 Conn. 270; Milhous v. Aicardi, 51 Ala. 594; Smith v. Ramsey, 15 N. B. R. 447; Rayl v. Lapham, 27 Ohio St. 452; Howland v. Carson, 28 Ohio St. 625; Seymour v. Street, 5 Neb. 85. See for a peculiar exception Poillon v. Lawrence, 77 N. Y. 207.