Sutton v. . Davis

ClaricsoN, J. The question involved: Whether the surety on a bond given 4 August, 1928, under C. S., 1526, upon appeal from judgment rendered in justice’s court to the Superior Court, is relieved from liability by discharge in bankruptcy of his principal, obtained while the appeal was still pending, and pleaded in bar of recovery at the time of trial in the Superior Court? We think so. 0. S., 1525, provides for stay of execution on appeal. C. S., 1526, is as follows: “The undertaking shall be in writing, executed by one or more sufficient sureties, to be approved by the justice or clerk making the order,' to the effect that if judgment be rendered against the appellant, the sureties will pay the amount together with all costs awarded against the appellant, and when judgment shall be rendered against the appellant, the appellate court shall give judgment against the said sureties.” This section was amended by Public Laws, 1933, chapter 251, which reads as follows: “Section 1. That‘section 1526 of Consolidated Statutes be, and the same is hereby, amended by adding at the end of said section, the following sentence: ‘And in the event that said defendant shall prior to entry of the final judgment be adjudicated a bankrupt, then and in that event, the surety or sureties on said bond shall remain bound as if they were codebtors with the defendant and the plaintiff may continue the prosecution of the action against said sureties, as if they were eodefendants in the cause.’ Section 2. That all laws and clauses of laws in conflict with said amendment are hereby repealed. Section 3. That this act shall be in full force and effect from and after its ratification. Eatified this 10 April, A.D. 1933.” It is admitted by plaintiff that defendant Davis pleaded his discharge in bankruptcy in bar of recovery and that he duly listed among his liabilities the judgment of Mrs. Loftin and that she had actual knowledge of the bankruptcy proceedings. It seems, therefore, that the plain *468 tiff, in any event, cannot recover against the defendant Davis, and the only question on this appeal is whether or not the plaintiff can recover from the defendant Stadiem as surety on the bond executed by the defendant Davis. We think the decision in Laffoon v. Kerner, 138 N. C., 281, decisive of this controversy. In that decision, at p. 206, speaking to the subject, we find: “It would seem too clear for discussion that if no judgment can be rendered against the appellant because of a discharge in bankruptcy pending the appeal, the contingency upon which the sureties are liable can never arise. Fontaine v. Westbrooks, 65 N. C., 528. It is said by Waite, G. J., in Wolf v. Siix, 99 U. S., 7 (8), ‘The cases are numerous in which it has been held and we think 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 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 made to depend. Of this class of obligations are the ordinary bonds in attachment suits to dissolve an attachment, appeal bond, and the like.’ . . . (p. 287.) We are of the opinion that upon the exhibition of the certificate of discharge, unless the plaintiff had shown that the debt was not scheduled and unless he had no notice of the proceeding in bankruptcy, the court should have dismissed the action.” Murray v. Bass, 184 N. C., 318; McCormick v. Crotts, 198 N. C., 664. This Court, in approving and distinguishing the Laffoon case, supra, in Murray v. Bass, supra, said, at p. 321: “In Laffoon’s case, supra, the liability of the surety on the supersedeas bond had not become fixed and absolute when the principal named thereon obtained his discharge in bankruptcy, and exhibited same to the court after plea setting up the fact; not so here. This, we apprehend, is a vital and important difference between the two cases. The contingency upon which the sureties in Laffoon’s case, supra, agreed to pay the judgment never happened— the discharge in bankruptcy of the defendant having destroyed plaintiff’s debt before the liability of the sureties thereon became fixed necessarily worked a dismissal of the action and a release of the sureties. Payne v. Able, 7 Bush. (Ky.), 344; 2 Am. Rep., 316. But here the contingency, upon which W. II. Murray agreed to pay Bass’ judgment, has happened, and his liability therefor has become fixed and absolute; and this before any discharge in bankruptcy relieving R. Pittman Barnes from its payment. W. M. Murray, therefore, at the present time, stands in the position of a codebtor. Section 16 of the Bankrupt Act of 1 July, 1898 (U. S. Comp. St. sec. 9600), which does not seem to have been amended or changed by subsequent legislation, reads as follows: ‘The liability *469 of a person wbo is a eodebtor witb, or guarantor, or in any manner a surety for, a bankrupt shall not be altered by the discharge of such bankrupt.’ ” Plaintiff in the brief says: “We would be lacking in frankness if we did not say we think the construction of the statute in the Laffoon case entirely too narrow, as that construction tends to defeat rather than to accomplish the manifest purpose of the statute, which is to protect the judgment creditor pending appeal against the insolvency of the judgment debtor.” We think the Laffoon case was well considered and ably written by Justice H. G. Connor, and supported by the weight of authorities. From the stipulation of counsel, we think a just construction is that the judgment signed at May Term, 1933, was by consent nunc ‘pro tunc, and relates back to February Term, 1933, before the amendment of C. S., 1526, was ratified 10 April, 1933, and therefore not applicable to this controversy. The amendment to C. S., 1526, by the act of 1933, is prospective and not retroactive. Statutes must be construed as having only prospective operation unless retrospective effect is declared or necessarily implied. Ashley v. Brown, 198 N. C., 369. Statutes are presumed to operate prospectively only. Hicks v. Kearney, 189 N. C., 316. The defense of the statute of limitation being considered a vested right, which cannot be taken away by legislation, we see no good reason why the same principle is not applicable in the present case. Wilkes Co. v. Forester, 204 N. C., 163. The judgment of the court below is Affirmed.