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April 7, tailPresent: LasceUes C.J. and Van Langenberg AJ.
GOPALSAMY v. RAMASAMY PULLE et at.47—D. C. Kandy, 20,267.-
Action under s. 247, Civil Procedure Code, against purchasers for valuefrom heirs of intestate—Heirs should not be made parties in theabsence of any allegation of fraud—May creditor sell the land underhis decree ?—Effect of conveyance by heirs—Paidian action.
The second defendant, who was . administratrix of the ©state ofone Erawady, on being called upon by Court to close the estate,conveyed the lands in dispute to the heirs (third to seventh defend-ants). The heirs sold the lands for value to the first defendant,who had notice that a decree against the intestate was unsatisfied.
In an action under section 247, Civil Procedure Code, by thedecree-holder against the defendants for a declaration that thelands were liable to be sold under his decree—
Held, (1) that the second to the seventh defendants should nothave been made parties to the action.
“ This case is not analogous (to a Paulian action). Fraud wasnot suggested in the plaint. The only questions were, whether thefirst defendant’s title – was a defeasible one, and whether theplaintiff, for the payment of his debt, could go against the propertyconveyed to the first defendant. The second to the seventhdefendants had no present interest in thedecision of these questions,and the contest ought to have been confined to the plaintiff andthe first defendant.”
Held, further, (2) that the plaintiff was entitled to succeed againstthe first defendant to the extent to which the purchase money wasnot expended for the purposes of administration.
“ There can be no question that a purchaser from an administra-tor who sells with the leave of the Court gets a title which cannotbe attacked by the creditors pf the estate, but the first defendant isnot in that position…. A conveyance by the heirs is undoubtedlyvalid. But the personal representative still retains power tosell the land conveyed for the purposes of administration, and thisincludes the right of a creditor to .follow the property for thepayment of his debt, and it is not competent for the heir3 to disposeof the assets of an estate to the detriment of the creditors.”
The Paulian action lies for the revocation of whatever has been•alienated in frauden creditorum, and it follows that when analienation of this kind is attacked, both the grantor and the granteeshould have an opportunity to defend it.
HE facts are fully set out in the judgment of the District Judge(F. R. Dias, Esq.)
This is an action under section 247 of the Civil Procedure Code for adeclaration that certain lands seized by the plaintiff under a writ againstthe second defendant are liable to be sold thereunder, and that twodeeds under which the first defendant claims title to those lands are
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subject to that liability. The facts of the case are these. The lands April 7,1911belonged to one Ibrahim Saibo Era wady, who died some years ago, Qopafawny vleaving his widow (the second defendant) and seven children (of whom Matmsamythe fourth, fifth, sixth, and seventh defendants were four). The PuUewidow obtained letters of administration, but without paying the estatedebts (or rather a considerable portion of them) she transferred all thelands to herself and the seven children on November 10, 1908, by deedNo. 1,545 (marked P 1). The third defendant in this case is the widowin her personal capacity, and on April 30, 1909, she and her four majorchildren, the fourth* fifth, sixth, and seventh defendants, sold andconveyed their undivided 9/ 16th shares to the first defendant by deedNo. 1,583 (P 2).
On March 20, 1908, one Carpen Chetty had obtained a decree againstthe administratrix for Rs. 666.25 and costs in case No. 18,510 of thisCourt, and the present plaintiff took an assignment of that decree andhad himself substituted as plaintiff on the record on October 20, 1908.
He issued execution and seized the lands, when the first defendantsuccessfully claimed 9/16ths under his deed P 2 of April 30, 1909. The7/16th shares of the minor children have been sold, but have not beensufficient to clear the debts. The question, therefore, we have to con-sider is, whether the title to the 9/16tlis derived by the first defendantthrough the administratrix’s deed of November, 1908, is free of liabilityto pay the estate debts.
In my opinion, there can be no defence, at all to this action, and I amsurprised that one should have been offered or persisted in.
We may take it as an elementary principle of law that an heir only getstitle to his ancestor’s property subject to the payment of his debts, sothat I fail to see how the first defendant or any one else has the right toobject to the plaintiff following up this property for the payment ofhis claim, in the absence of proof that there is other property availablefor discussion. As was held by the Supreme Court in Ekanayake v. Appu,*when a creditor holds a judgment against an administrator, the assetsof the intestate cannot be held or disposed of by the heirs to theiradvantage or to the creditor’s detriment.
It was contended that the 7/16th shares not dealt with by the deedP 2 were more than sufficient to pay the plaintiff’s claims, so that noobjection can be raised to the validity of that deed. This is scarcely anargument wliich is open to these defendants, for the fact remains thatat the Fiscal’s sale they only realized a very small sum—a result verypossibly due to the complication created by the execution of thisimpeached deed. Nor was this proceeding on the part of the majorheirs one that could in any way be justified, for clearly it was an attemptby them to make the minor hiers alone pay their father’s debts.
The first defendant has not even the merit of being an innocentpurchaser of these 9/16th shares, for he appears to have plunged intothis litigation with his eyes wide open. He was warned in time aboutthe plaintiff’s claims against the estate, but yet he conspired with thewidow and the other defendants to have this deed executed in hisfavour in the hope of defrauding the plaintiff.
I accept unhesitatingly all that the plaintiff has staled on this partof the case, which reveals a remarkable state of things. Before theadministratrix executed her deed P 1 in November, 1908, the plaintiff
1 (1S99) 3 X. L, h 3301
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April 7,1011 held three money decrees against the estate for some Rs. 1,200, and aGo xiham v morfcSa€e decree for Rs. 1,313, making a total of something overRavmamy IIs- 2,500, plus interest and costs. He seized two of the estate landspntlr under the mortgage decree, and the sale was fixed for May 1, 1009. Inthe meantime he heard that the first defendant was preparing to buyup the lands or take a mortgage of them, and told him of his claimsagainst the estate, and even offered to assign all his judgment to him.The first defendant then said that he was not going to touch .theproperties. This took place about two weeks before he took thetransfer P 2 of April 30, 1900. On that day the plaintiff chanced tobe in Kandy, and heard from his proctor that the amount of themortgage decree had been paid to him that morning, and that he hadbeen got to write to the Fiscal to release the seizure and stop the salethat had been fixed for the next day.
The plaintiff had hoped that, when the sale took place under hismortgage decree, sufficient would be realized for the payment of hismoney decree also, but as that sale was now stopped he was naturallyalarmed, and went at once to Mr. Beven, his proctor in the other cases,to get the lands seized again. For some reason or other Mr. Beven didnot issue the writ as requested by the plaintiff, but to his horror theplaintiff discovered that at that very moment the first defendant andthe other defendants were engaged in Mr. Beven’s office in executing .this deed P 2.
The plaintiff protested against it and made a great noise, and proceed,ed forthwith to the Registrar's Office and entered a caveat against theregistration of that deed. These are facts which have been provedeven out of the mouth of the administratrix herself, and it is thereforeidle for the first defendant to say that he was an innocent purchaser.The price paid by the first defendant was Rs. 2,500, out of which a sumof Rs. 1,362.49 was certainly paid in respect of the plaintiff’s mortgagedecree, but not a cent of the balance has been used for the payment ofany of his unsecured claims. If the first defendant was the honestpurchaser he professes to be, it was at least his duty to see ,that thebalance was appropriated for the settlement of the other claims, of whichhe had notice. Far from being that, it appears quite clear to me thatlie deliberately lent himself to the perpetration of a fraud on theplaintiff, but miscalculated the value of the title he was taking fromthese people.
I find, therefore, that both the deeds P 1 and P 2 are subject to thepayment of the debts of the late K. Ibrahim Saibo Erawady, and thatthe 9/16th shares of lands seized by the plaintiff under his writ in caseNo. 18,510 are liable to be sold thereunder.
Let decree be entered for plaintiff as prayed for, with costs as againstall the defendants except the sixth, and let a decree nisi be entered asagainst the sixth.
//. J. C. Pereira, for the defendants, appellants.—The second tothe seventh defendants should not have been made parties to thiscase. This is not a Paulian action. No relief is claimed as againstthese defendants. The first defendant purchased the lands forvalue from the heirs, who had a conveyance from the administratrix.
A creditor of the estate cannot under these circumstances follow the
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property in the hands of the first defendant (Nugent v. Gifford1). AprU7,i9i.iThe first defendant was not bound to see whether the purchase Q0^^amymoney was applied for the payment of debts of the estate (Corser v.v.
Cartwright2). Counsel also referred to Fernando v. Perera? Silvav. Silva*
Senevirama (with him //. A. Jayewardene), for the respondent.—
There is no misjoinder of parties ; although no relief is claimedagainst the second to the seventh defendants, they are necessaryparties to the action, fn an action under section 247 of the CivilProcedure Code the judgment-debtor is always a party. The secondto the seventh defendants are the heirs of the intestate (debtor). TheDistrict Judge, moreover, holds that the first defendant and theother defendants conspired to defraud plaintiff.
The facts of this case show clearly that the first defendant wasaware of the fact that debts of the intestate remained unpaid at thetime of his purchase. He was, therefore, bound to see that thepurchase money was applied to satisfy creditors. The judgment ofClarence J. in Fernando v. Perera supports that view. See alsoEkanayake v. Appu,5
Pereira, in reply.
Cur. adv. vult.
April 7,1911. Van Langenberg A.J.—
The second defendant is the widow and administratrix of oneErawady, who died intestate, and in her personal capacity she isthe third defendant. The fourth, fifth, sixth, and seventh defend-ants are some of her children. She and these defendants wereentitled to 9/16th shares of Erawady’s estate, which consisted ofboth movable and immovable property. As administratrix shewas called upon to close the estate, and on the orders of the Courtshe, on November 10, 1908, executed a conveyance of all the landsthat formed part of Erawady’s estate in favour of herself and theother heirs of Erawady. On April 30, 1909, she and the fourth,fifth, sixth, and seventh defendants conveyed their interests inthese lands to the first defendant. Erawady and another hadgranted a promissory note to one Carpen Chetty, who sued on it inD. C. Kandy, 18,510, and obtained a judgment against the seconddefendant as administratrix for Rs. 666*25 and costs. The decreewas assigned to the plaintiff, who issued writ and seized the sharesof the lands which had been conveyed to the first defendant, whoclaimed the same. The claim being upheld, the plaintiff broughtthis action under section 247 of the Code, and a decree has beenentered declaring that the transfer by the administrator to the heirsand that in favour of the first defendant are subject to the payment
1 (1738) 1 Atlcyna 462.3 (1887) 8 S. O. O. 54.
* (1875) L. R. 7 Eng. and Ir. App. 731.4 (1907) 10 N. L. R. 234,
6 (1899) 3 A L. R, 350,
?W. W. A 88948 (11/49)
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of the debts of Erawady’s estate, and that the shares in question areliable to be sold under the writ issued in the promissory note case.
All the defendants save the sixth have appealed. It was contend-ed for the appellants (1) that there has been a misjoinder of parties,the objection being that the second to the seventh defendants havebeen wrongly joined ; (2) that the first defendant being a purchaserfor value and holding a title derived from the administratrix, theshares he bought were not liable to be seized and sold on the plain-tiff’s writ. On the first point the Judge made the following order :—
I must rule against the defendants on the first issue, and hold thatthe second to seventh defendants have been property added as partydefendants. There is no difference between this and a Paulian action,and the plaintiff cannot very well attack the deed on which the firstdefendant ba-ses his title without at the same time attacking the deedunder which his vendors derived title.
I am of opinion that this ruling is wrong- The Paulian actionlies for the revocation of whatever has been alienated in fraudemcreditorum, and it follows that, when an alienation of this kind isattacked, both the grantor and the grantee should have an oppor-tunity to defend it. This case is not analogous. Fraud was notsuggested in the plaint. The only questions were, whether the firstdefendant’s title was a defeasible one, and whether the plaintiff,for the payment of his debt, could go against the property conveyedto the first defendant. The second to the seventh defendants hadno present interest in the decision of these questions, and thecontest ought to have been confined to the plaintiff and the firstdefendant. I would set aside the decree so far as it affects thesecond, third, fourth, fifth, and seventh defendants, and dismissthe action as against them with costs.
On the second point the facts material are as follows. The firstdefendant paid Rs. 2,500 for the shares he bought. Two of thelands sold to him had been mortgaged by Erawady to the plaintiff,who obtained a mortgage decree and seized these lands, and theywere under- seizure at the time of the first defendant’s purchase. Heredeemed them by paying to the plaintiff the full amount of thewrit, namely, Rs. 1,376* 99, out of the Rs. 2,500. The first defendantpaid Rs. 37*50 to the* Fiscal as his charges in connection with theseizure under the mortgage decree, and the balance Rs. 1,085*51was in effect paid to the second defendant. There is no proof thatany portion of this amount went in payment of any debts due byErawady’s estate, and it must be taken that she personally benefitedby it. I accept it as proved that the first defendant paid fullvalue, for the shares he bought. It has also been established thatthe first defendant, when he- bought, had notice that the decree inD. G. Kandy, 18,510, had not been satisfied. It was argued byMr. Pereira, for the first defendant, that the title from an adminis-trator is paramount, and that there was no duty cast on the first
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defendant to see to the application of the money paid by him. AprUT,i9iiThere can be no question that a purchaser from an administrator yANwho sells with the leave of the Court gets a title which cannot be Lanqen-attacked by the creditors of the estate, but the first defendant is BBB0 A,J'not in that position. It may be, too, that a purchaser from heirs Qopalnamyv.who hold a conveyance from an administrator may assume that Baeverything has been rightly done, and is not put upon inquiry asto whether the debts of the estate have been paid, In this case,however, the first defendant, as I have stated, had notice of theoutstanding decree, and the question is whether, in these circum-stances, it was not incumbent on him to see that all the moneypaid by him was rightly applied. A conveyance by the heirs isundoubtedly valid (vide Silva v. Silva1). But, as observed byHutchinson C.J., the personal representative still retains power tosell the land conveyed for the purposes of administration, and thisincludes the right, of a creditor to follow the property for the pay-ment of his debt, and it is not competent for the heirs to disposeof the assets of an estate to the detriment of the creditors (vidvEkanayake v. Appu'1). In the case of Fernando i>. Perera3 thecontest was between the administrator as plaintiff and the pur-chasers from the heirs. The latter succeeded on the ground that theconsideration for the purchase was wholly applied for the benefit ofthe estate. In my opinion the onus lay on the first defendant toshow that the whole of the purchase money was expended for thepurposes of administration,* and as he has failed to discharge thisburden as regards the sum of Rs. 1,085.51, the plaintiff, I think, isentitled to levy execution to this amount. I am unaware what theexact sum is which is due to the plaintiff, but if it exceeds this sum,he cannot proceed for the excess against the shares seized. Perhapsthe parties will agree as to the amount which is due. The plaintiffis entitled to the costs of the action and of this appeal as against thefirst defendant, but he will pay to the other appellants the costs ofthis appeal. I have already mentioned that in the plaint there was/no allegation of fraud, but at the trial the plaintiff’s counsel isrecorded as having characterized the whole transaction as a fraud,and this charge seems to have been entertained to some extent bythe learned Judge. It seems to me that if the plaintiff desired toattack the transfers on this ground, the defendants had a rightto insist on a proper amendment of the plaint and the framing ofappropriate issues. From the facts disclosed on the record, I amunable to agree with the learned Judge in his finding that the firstdefendant conspired with the widow and other defendants to have thedeed executed in his favour in the hope of defrauding the plaintiff.
Lascelles C.J.—I concur.
1 (1907) 10 N. L. R. 234.* (1899) 3 N. L. R. 350.
(1887) 8 S. O. C. 54
GOPALSAMY v. RAMASAMY PULLE et al