The trial found that prior to October 19, 1922, the defendant Miller known as the son, owned a half interest in the land involved — the other half being owned by one F. Boesch; that Miller gave a mortgage to the plaintiff, on this interest subject to a first mortgage, both mortgages being recorded; that the first mortgage was assigned to Miller’s father, who foreclosed it and bid in the land at the sale; that no redemption was made and sheriff’s deed was issued to the father; that the son “went through bankruptcy” by filing his schedules, listing his indebtedness to plaintiff and receiving a discharge; that thereafter about April 16, 1922, the son organized the appellant corporation under the laws of the state of Delaware; that the appellant corporation “was what is commonly termed a ‘one-man corporation;’” that the father then sold the land to the son, giving him a deed, with the name of the grantee omitted, and with authority to insert the name of any grantee he saw fit; F. Boesch joined in this ■deed and conveyed all of his interest in the land involved, the deed being given for the use and benefit of the son; that the son thereafter had one of the directors of, the company insert the name of the appellant in the deed as grantee and then delivered the deed to the grantee.
Plaintiff brings this action to foreclose its mortgage, and the Bankers Discount Acceptance Corporation says the mortgage is extinguished. The defendant Miller defaulted and the trial court entered findings of fact, conclusions of law, order of judgment and judgment in favor of the plaintiff and decreed the foreclosure of this mortgage. The Bankers Discount Acceptance Corporation appeals, demanding a trial de novo.
*277 There are fourteen specifications of error, all centering around four of the findings of the trial court and the conclusions of law drawn therefrom.
The appellant says the court was in error in finding; that the father sold the land to the son; that the father gave the son a deed for the use and benefit of the son, with the name of the grantee in blank; that the grantee’s name was inserted by an officer of the appellant; and finding that the appellant had notice of any interest of the plaintiff in the land subsequent to the foreclosure of the first mortgage.
Without setting forth the testimony it is sufficient to say the findings of the trial court are fully sustained by the evidence. It is true the son denies that he received such a deed. He says the father and Boesch issued the deed to the appellant, but the testimony ..of a director of the appellant corporation is full and complete showing that when the deed was presented by the son there was no grantee named therein, that the son said he bought the land from his father and received this deed for his own use and benefit with the name of the grantee omitted, and that at the direction of Hiller the director inserted the name of the appellant as grantee and thereafter the deed was delivered. The testimony also shows, almost without dispute, that at the time the deed was delivered by Hiller it was agreed he was to receive five hundred shares of stock in the corporation for this land and other lands which he was selling to the corporation; that these lands were all the assets of the corporation at that time; that the stock issued was all of the stock of the company issued at that time, and that four hundred eighty-nine shares of stock were issued to Hiller and eleven shares issued to others whom he named for the purpose of enabling him to carry on the corporation. It is clear that the son had the company organized in Delaware, that the resident directors of Delaware immediately thereafter-wards resigned and Hiller and two others were elected in their place; —in fact that the defendant corporation was merely Hiller operating under another name, and the other shares were issued at that time merely to allow him to operate.
Appellant says that in any event plaintiff cannot recover; that there was no redemption from the foreclosure of the first mortgage; that before the defendant went through bankruptcy the lien of the second mortgage was extinguished; that by going through bankruptcy the de- *278 fenclant Miller was discharged from bis indebtedness and any liability on bis covenants and warranties contained in tbe mortgage.
Tbe mortgage given to tbe plaintiff contains tbe following covenants:
“Tbe said party of tbe first part (P. W. Miller) does covenant with tbe said party of tbe second part, (tbe plaintiff) its successors and assigns, that be is lawfully seized of said premises; that be bas good right to convey tbe same; that tbe same are free from all incumbrances, except incumbrances of record, and that be will warrant and defend tbe title to tbe same against all lawful claims, hereby relinquishing and conveying all rights in and to tbe said premises.”
Tbe covenants and warranties in this mortgage are independent of each other. They are of “materially different import and directed to different objects.” See Bush v. Cooper,
Appellant criticizes Smith v. Gaub, saying: “We consider tbe reasoning of tbe case of Smith v. Gaub,
This case was decided in 1910. It bas plenty of support in authority, representing, as it does, one line of opinion. Even if this court, as now constituted, was of the opinion the other line of authority should have been adopted this principle bas become the established rule of property for this jurisdiction, and should not be disturbed.
Such warranty “to defend the title — against all lawful claims” es-tops the defendant Miller from asserting any adverse rights in any subsequently acquired title. See Smith v. Gaub, supra; Martin v. Yager,
*279 “Title acquired by tbe mortgagor subsequent to the execution of the mortgage inures to the mortgagee as security for the debt in like manner as if acquired before the execution.”
This applies to a case where the mortgagor had title, lost it, and subsequently re-acquired title, as much as it does to a case where the mortgagor did not have title at first, but gave a mortgage and after-wards acquired title.
The son could not assert that the foreclosure of the first mortgage cut off the second mortgage. Subsequently acquiring title to the same land estops him. The law presumes that when repurchased the land he had a good motive in mind; that he purchased it for the purpose of protecting the warranty he had given in this mortgage, and where without such protection the warranty would fail. Consequently the law presumes he was trying to live up to his agreement, and will not permit him to assert a bad motive. “The law, in circumvention of dishonesty will conclusively presume that it was made in the performance of duty, and not in repudiation of it.” Brown v. Avery,
In Yerkes v. Hadley,
In Ayer v. Philadelphia & B. Face Brick Co.
See also Lincoln v. Emerson,
Appellant contends that even if there be authority for the contention that the exception of mortgages of record from a clause of general warranty does not control other general warranties, nevertheless this is from jurisdictions where the mortgage is “considered an actual conveyance, and not merely as creating a lien as in this state.” This contention, however, is set at rest by Smith v. Gaub,
The appellant cites State ex rel. Forest Lake State Bank v. Herman,
“Tbe court below seemed to think tbat, because there bad been a reacquisition of tbe mortgaged property by tbe defendant, tbe lien of tbe discharged mortgage bad been thereby revived, hence entered judgment on tbe demurrer for tbe plaintiff. This was a mistake; a result such.as this could only come by way of estoppel.”
Tbe court was not considering tbe effect of warranties or covenants and no reference is made thereto.
Tbe appellant says tbe defendant Miller went “through bankruptcy” and thus whatever warranties were contained in tbe mortgages yrere discharged; therefore there was no indebtedness, no lien, and no warranty.
Speaking of tbe rights under tbe covenants appellant says: “We contend tbat tbat right was at tbe very most a contract to give it a lien in case tbe mortgagor ever became seized of tbe land again, and tbe plaintiff bad a then present right of action for breach of tbe covenant.”
Tbe trial court found tbat tbe defendant Miller not only filed bis schedule in bankruptcy but also listed therein indebtedness to the Merchants National Bank, and thereafter received bis discharge in bankruptcy. There is nothing in tbe record which shows any listing of debts or broken covenants, or tbe filing of any schedules. Tbe record does not show what was done in tbe bankruptcy proceedings. Tbe only evidence to sustain this finding is tbe statement of witnesses tbat Miller “went through bankruptcy.” Plaintiff says tbat as trial de novo was demanded by tbe appellant this court should pass upon tbe facts dealing with tbe bankruptcy, and eliminate all findings as to bankruptcy. Possibly, in tbe absense of further testimony we may assume tbat “going through bankruptcy” means taking all tbe necessary steps though it is a mere conclusion; but we cannot assume tbat in bis schedule of indebtedness defendant listed any provable claim arising from broken covenants contained in tbe mortgage even if tbe court did find be “listed therein bis indebtedness.” Waiving this however and assuming tbat tbe bankruptcy proceedings were as extensive, full and complete as appellant assumes, nevertheless it does not affect
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the estoppel. There is a distinction between the pecuniary liability which arises from broken covenants and the estoppel by reason of the covenants. As said in Philly v. Sanders,
“Such a covenant is not only one running with the land, for the breach of which the covenantor is liable in an action for damages, but is something more. By its operation a paramount title, subsequently .acqrured by him enures to the benefit of the covenantee, and in equity he is estopped from asserting that any outstanding title existed inconsistent with what he undertook to convey. It has therefore been held that a discharge in bankruptcy, while effectual to release the covenantor from liability in an action for a breach of the covenant, does not at all effect the estoppel. This is on the ground that, as the release is by force of the statute, and not by the act of the covenantee, or those claiming under him, no greater effect will be given to it than is warranted by the terms of the statute; and for the further reason that existing personal liability is not necessary to work an estoppel, and consequently there is no necessary connection between the personal liability of the debtor on his covenant and the estoppel which arises therefrom.”
In Kezer v. Clifford, 59 N. H. 208, we have a case where a mortgagor, after his discharge in bankruptcy, repurchased the land from one who had bought it at tax sale. The court says:
“The mortgage debt was not paid, nor was the mortgage discharged by the discharge of the defendant in bankruptcy. Although he was thereby relieved from personal liability for the debt, and for damages for breach of his contract generally, which could have been proved against his estate in bankruptcy, he was not freed from the estoppel of the mortgage covenants. Covenants are contracts, but they operate by way of estoppel as well as by way of contract; and the discharge of tho bankrupt from personal liability for damages for breach of the contract does not release him from the estoppel which does not depend upon personal liability for damages. The debt is regarded as subsisting, so *283 far as it is necessary to uphold the mortgage. . . . He is liable for ■any breach of the covenants in the mortgage arising subsequent to his discharge. . . . And the tax title acquired by him passed to the plaintiff by way of estoppel, by force of the warranty, as if the discharge in bankruptcy had not been granted.”
See also Frye v. Bank of Illinois,
In Hallyburton v. Slagle,
In Bush v. Cooper,
The personal discharge in bankruptcy of a covenantor does not free-
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him from an estoppel arising by law from his prior covenant of warranty of title and against incumbrance in the deed. Bush v. Person,
It is the contention of appellant that the doctrine of Bush v. Person, supra, is no longer binding owing to the fact we have a new bankruptcy law, and that the subsequent decisions of the United States Supreme Court such as Fleitas v. Richardson,
The bankruptcy law does not discharge mortgage liens and the defendant being estopped from denying he gave this lien, and estopped from showing the lien had been extinguished by a prior foreclosure, and having covenanted “that he will warrant and defend the title against all lawful claims,” and our statute providing that after acquired title inures to the benefit of the mortgagee, it is clear Miller could not assert any such defenses against the foreclosure of this mortgage.
The last point urged is that so far as the appellant is concerned its title is good even if defendant Miller be estopped from denying his warranty. This position cannot be maintained for two reasons:
First, the appellant well knew when it took the deed that it was getting the land from the son and not from the father, the grantor named in the deed. The second mortgage was not satisfied of record in the office of the register of deeds of Ward county. There is nothing in this case to show what the state of the record was after the record of the first and second mortgages. There is nothing to show the sheriff’s deed to the father was ever recorded and in any event after this second mortgage was on record appellant had notice of the covenants therein contained, and it is not' denied but what the appellant corporation knew the P. W. Miller selling the land to it was the mortgagor.
Second, “a purchaser from the mortgagor without actual notice of the second mortgage has no better title than the mortgagor.” Ayer v. Philadelphia & B. Face Brick Co.159 Mass. 84 , 34 N. E. 177. Here the court held that title inured to the benefit of the second mortgagee *286 even though, the mortgagor in the interval between foreclosure and acquiring the subsequent title went through bankruptcy.
Rigg v. Cook,
It is not claimed that because F. Boesch deeded his interest in the land to defendant Miller, such interest is subjected to the mortgage of plaintiff. The appellant has it. The judgment of the lower court is affirmed with costs.