Reed v. Pierce , 36 Me. 455 ( 1853 )

Appleton. J. —

The defendant conveyed to the plaintiff by deed of warranty, premises, which at the time were subject to mortgage, and has since received Ms discharge in bankruptcy. At the time of his application and discharge, the notes secured by mortgage were outstanding and no entry had been made by the mortgagee for the purpose of foreclosure. Subsequently the mortgage was foreclosed and the plaintiff was evicted by the paramount title of the mortgagee. This suit is brought on the several covenants of the defendant’s deed, in bar to the maintenance of which the defendant has pleaded his discharge.

The covenant against incumbrances was broken at the time of the conveyance. The damages to which the plaintiff was entitled were readily ascertainable. If he had paid the mortgage notes, the sum paid would have been the measure of damages. If the incumbrances had not been removed and there had been no action on the part of the mortgagee to enforce his mortgage, the plaintiff’s damages would have been nominal. To this covenant, as it was broken before the defendant’s bankruptcy, and as the plaintiff might have prov,ed his claim for its breach, the discharge is a bar.

The several covenants in a deed of warranty are distinct; their breach arises at different times; is established by proof of different facts, and damages therefor may be enforced by different suits and recompensed by different rules of assessment. It is obvious then that what may be a discharge of one is not necessarily that of another and distinct covenant.

The breach of the other covenants was long after the discharge in bankruptcy. So far as the claims now in suit could have been proved and the plaintiff have received his dividends upon their proof, the discharge is a bar, and no farther.

The defendant, to show that they might have been ‘proved, relies on the sixth section of the Bankrupt Act, by which .persons having uncertain and contingent demands are permitted to come in and prove such debts or claims.

The meaning of the phrase contingent demand, and the corresponding expression in the English bankrupt law, debt payable upon a contingency, has been definitively settled by repeated adjudications in this and in other States, as well as by the English Courts. In Woodard v. Herbert, 24 Maine, 360, the distinction between a contingent demand and a contingency whether there ever would be a demand, was recognized and adopted. “ The contingent or uncertain demands provided for,” says Shepley, J., “ in the Act of Congress, are the contingent demands, which were in existence as such, and in a condition, that their value could be estimated at the time when the party was decreed a bankrupt.” The same construction was reaffirmed in Ellis v. Ham, 28 Maine, 385, and in Dole v. Warren, 32 Maine, 94. In Goss v. Gibson, 8 Humph. 199, it was held that a discharge in bankruptcy would not relieve one surety from the claim of another surety who had paid money for the principal after the decree. “ At the time these defendants were declared bankrupts,” says Green, J., “ the' complainant had no debt or demand against them. The complainant had no demand that could be proved at the time the defendants were declared bankrupts. The possibility of the demand that now exists was incapable of valuation.” It was decided in Cake v. Lewis, 8 Barr. 493, that the liability of a principal to his guarantee was not discharged by bankruptcy. In Boorman v. Nash, 9 B. & C. 145, the defendant, who had contracted for a certain quantity of oil to be delivered to him at a future day at a certain price, became bankrupt before the day arrived and obtained his certificate. “ The right of the plaintiff,” says Lord Tenterden, “ to maintain this action, depends upon the question whether he could or could not have proved his demand under the commission of bankrupt issued against the defendant. It appears to us impossible that he should so prove it; for at the time when the commission issued, it was uncertain not only what amount of damage, but whether any damage would be sustained.” A similar decision was made in Woolley v. Smith, 54 E. C. L. 610.

In Thompson v. Thompson, 2 Scott, 266, it was decided that the installments of an annuity, for the payment of which a surety expressly covenanted in default of the grantor, are not proveable under a fiat against the surety, when such installments do not become due until after the bankruptcy of the surety. “ Before the days of payment arrive,” said Tindal, C. J., in delivering his opinion, “ these installments are not only no debt, but can never become a debt from the surety, except in the event that the grantor of the annuity shall make default in such payments. The value of such a contingency it is impossible to calculate. Exparte Davis, 1 Dia. 115; Toppan v. Field, 4 Ad. & El. N. S. 387 ; Henlen v. Adaman, 2 Man., Gran. & Scott, 369.

In the South Staffordshire Railway Co. v. Burnside, 2 Eng. Law & Eq. 418, the holder of shares in a corporation, who became bankrupt, and received his certificate, was held not to be discharged from his liability for subsequent calls.

In Hankin v. Bennett, 14 Eng. Law & Eq. 403, the defendant executed a bond, whereby he became liable as surety to pay the plaintiff such costs as the plaintiff should in due course of law be liable to pay in case a verdict should pass for certain defendants in an action of scire facias, in which the now plaintiff sued as a nominal party. “ We think, however,” says Martin, B. “this liability was not a debt at all within the meaning of the section. It was a contract to indemnify a nominal plaintiff whose name was used by a third person, against such costs as the plaintiff would become liable to pay if the defendants should obtain judgment in their favor. It seems to us impossible to consider that this is a debt. It is a contingent liability, but not a contingent debt.”

The plaintiff could not have proved any claim for breach of the covenant, that the defendant would warrant and defend the premises against the lawful claims and demands of all persons, for it had not been broken. Whether there were any such claims and demands outstanding, and whether they embraced the whole or a part of the premises conveyed, was uncertain. If any such existed, their enforcement was dependent on the will of those having such claims. The plaintiff could not have presented any present claim or existing demand. The possibility that one might arise, is not enough. In all sales of personal property the title of the vendee may be defeated by adverse and superior rights. In such sales there may be a breach of the implied warranty of title by subsequent eviction. The vendee of real or personal property, in the undisturbed enjoyment of his purchase and without any breach of the covenants, express or implied, of his vendor, can hardly be considered as having a contingent claim, because of the possibility that some unknown claimant may at some indefinitely remote period of time interpose a superior title, by means of which he may be deprived of the property purchased. If the unbroken covenants of a deed, or the possible breach of the implied warranty of title in sales of personal property, were to be deemed claims within the statute, then every grantee or vendee might present his claim before the commissioner, and the estate of the bankrupt would remain unadjusted till all possibility of a breach should be barred by the statute of limitations, for it could not before such time be known that they might not arise. Such a position would be entirely at variance with the provision of § 10, which requires that all proceedings in bankruptcy shall be brought to a close within two years after the decree declaring the bankruptcy, if practicable, for it would lead to an indefinite postponement of the settlement of estates. It was adjudged in Bennett v. Bartlett, 6 Cush. 225, in relation to personal property, that a discharge in bankrupcy was no bar to the creditor’s right of action against the debtor, on the implied warranty of title, when the breach occurred after such discharge. The reasoning of the Court in that case is equally applicable to the case at bar.

The result is, that the discharge affords no defence, except as to the covenant against incumbrances, which alone could have been proved. Defendant defaulted.

Shepley, C. J., and Tenney, Rice and Hathaway, J. J., concurred.