Haniffa v.—Abdul Wahab
Present: Rajaratnam, J. Wijesundera J. andVythialingam, J.
HANIFFA, Appellant and ABDUL WAHAB, Respondent.S.C. 244/71 (F)—D.C. Kandy, M.B./4652.
Mortgage Action—Mortgage of an undivided share of land—Assignmentof mortgage after institution of partition action—Applicability ofsection 67 of the Partition Act.
Where an undivided share of a land is mortgaged prior to theinstitution of a partition action hut the interests under the mortgagebond are assigned after the institution of the partition action.
Held : That the assignment is valid and it is not a voluntaryalienation of any interest of or in the land ; arid section 67 of thePartition Act has no application.
“ When a mortgagee assigns his rights under the mortgage bondhe transfers to the assignee his right to recover the debt and alsohis interest in the land which serves to secure that obligation. It ’is, therefore, a transfer of his interests in the land to the assigneeand is therefore caught up in the prohibition contained' in section 67just as much as a hypothecation itself is caught up.”
A PPEAL from a judgment of the District Court, Kandy.
D. Guruswamy with Daya Pelpola for Plaintiff-Appellant.L. Gamini Dissanayake for Defendant-Respondent-
RAJARA'l NAM, J.—Hanijja v- Abdul Wahab
November 12, 1974. Rajakatnam, J.
I have had the advantage of fully considering the reasons wellset out by Wijesundera J. and Vythialingam J. for their respec-tive orders. I agree with Wijesundera J. in the particularcircumstances of the present case. The plaintiff’s case has beenthat the defendant in the final partition decree has been allottedhis share in the land subject specifically to this encumbrancecreated by the hypothecation which was prior to the institutionof the Partition Action- In other words, under s.48 of the Act,the said allotted share was not free of this encumbrance, that isto say, the encumbrance created by the said hypothecation be-fore the institution of the action survived the final decree.
In the case, therefore, valid hypothecation continued to bevalid. The defendant in the mortgage bond (vide terms of thebond No. 15,749 of 1948) bound himself not only to the mort-gagee, but to her attorney, heirs, executors, administrators orassigns.
The charge on the land had already been created in favourof the mortgagee and “ her aforewritten ” before the institutionof the Partition Action. Section 67 of the New Act does notextinguish a right already created by a valid hypothecation andmoreover s.67 invalidates only rights that are sought to becreated after the institution of a partition action. Therefore, if ahypothecation survives the Final decree in a partition case, itsurvives as a charge on the land against the mortgagor and inmy view the fact that the charge collaterally gets assigned toanother does not extinguish the charge. In these circumstances,although, as Vythialingam J. correctly points out, there is adifference between the owner being prohibited and others inaddition to the owner being prohibited, this difference has nosignificance on the facts of this case, where the encumbrancesurvived to be attached to the defendant’s land under a validhypothecation.
I am of the view that the plaintiff had the charge in hishands, that is the interest flowing from the mortgage bond, whenthe encumbrance survived the partition decree. For these rea-sons with great respect I am unable to agree with Vythialingam,J. I, therefore, agree with the order made by Wijesundera J. thatthis appeal should be allowed and that the plaintiff is entitled tojudgment as prayed for with costs here and below.
The question that arises for decision in this appeal is whethera deed of assignment of a mortgage of an undivided share ofland executed after the institution of an action for the partitionof that land is void. I have read the reasons of Vythialingam, J.
WUESUNDERA, J.—Haniffa v. Abdul Wahab
who is of the opinion that it is void as regards the hypotheca-tion but the assignee (plaintiff-appellant) is entitled to a money-decree against the mortgagor (defendant-respondent). Withrespect, I do not agree.
No evidence was led in the case- According to the pleadingsthe defendant-respondent mortgaged an undivided^ share of aland by bond No. 15749 of 18th October 1948 to RV who assignedit in 1950 to AM. AM in 1957 assigned it to R who on 25th March,1961 assigned it by deed No. 120 to plaintiff-appellant. When thelast assignment was made there was a partition action pendingin respect of the land. In that action, D. C. Kandy 5432, thedefendant-respondent was allotted a divided portion shown ina plan of 1967 but declared subject to the mortgage on bondNo 15749 of 18th October 1948. It is this divided portion whichthe plaintiff-appellant prays is liable to be sold in satisfactionof the debt. The learned District Judge concluded that theassignment was void by reason of Section 67 of the PartitionAct and dismissed the plaintiff’s action.
Section 67 (1) of the Partition Act declares “ After a partition
action is duly registeredno voluntary alienation, lease or
hypothecation of any undivided share or interest of or in the
land to which a partition action relates shall be made”,
and sub-section 2 declares any such alienation, lease or hypothe-cation in contravention of sub-section I void. This transactionis not a hypothecation. The land has already been mortgaged orhypothecated. The only question for consideration is whetherthe assignment of the mortgage can be termed “ a voluntary
alienation of an interest of or in the land ”. A mortgage
is that privilege over the property of another which tends to thesecurity of a debt or personal claim, says Walter Pereira, page512, on the authority of a passage from Grotius. If it is a privi-lege over property it is not an interest of or in the property.But this same passage from Grotius is translated in Lee, RomanDutch Law, Page 162 as “ A mortgage is defined as a right overanother’s property which serves to secure an obligation. ”Maarsdorp, Volume 2, page 223, and Wille, South African Law,page 180, give the same translation as Lee- It only serves tosecure an obligation. It is not a right of property. It is interestingto note that the Mortgage Act of 1948 defines a mortgage toinclude any charge on property for securing money or money’sworth. The purpose of a mortgage is to secure the payment of adebt- If the debt is paid no question of the exercise of any rightsarise. Only if the debt is not paid can the mortgagee claimthrough a Court his remedy to sell the property and to realizehis money. So that when the mortgage is assigned what isalienated is the right to sue the mortgagor for the debt, and ifthe debt is not paid, to realize it by the sale of the land. The
WlJESUNDERA, J.—Haniffa v. Abdul Wahab
assignee steps into the shoes of the mortgagee. What is alienat-ed by assignment is not an interest of or in the land. Hence theassignment of the mortgage is not a voluntary alienation of anyinterest of or in the land and Section 67 of the Partition Acthas no application.
The object of Section 67 of the Partition Act, as much asSection 17 of the old Ordinance, is undoubtedly to prevent delayby the intervention of parties. The plaintiff in a partition actionis required to disclose, by virtue of Section 10 and Section 5of the Act, a mortgage on the land and to make the mortgageea party. All that can happen thereafter is that the share allottedto the mortgagor is declared subject to the mortgage. Whateveri.he mortgagee does, whether he assigns or puts the bond in.suit, the share allotted to the mortgagor will be subject to themortgage. Then whoever intervenes, whether mortgagee orassignee, there can be no delay as all that can happen is thatthe share of the mortgagor is declared subject to the mortgage.The object of Section 67 is then not defeated and consequentlythat cannot be a reason for invalidating an assignment of amortgage, particularly in this case as the share of the mortgagorhas been declared, subsequent to the assignment, subject to themortgage.
It is interesting to note that Section 50 of the Partition Act
speaks of “the rights of the mortgagee or of the purchaser
of the mortgaged share under a mortgage decree. … ” shall belimited to the mortgagor’s share- This contemplates the mort-gagee putting his bond in suit and selling the land pendingpartition. Then I will not subscribe to the view that the partitionAct contemplates the prohibition of an assignment of a mortgageexisting on the day of the institution of a partition action.
In Don Carolis vs. Sirisena (1923) 2 Times of Ceylon LawHeports, 90, at 91 Ennis, J. (with whom Garvin, J. agreed) said“Mr. Jayawardena for the appellant argued that Section 17 ofthe Partition Ordinance made the assignment of the mortgagevoid. In my opinion that argument also is not consistent with theterms of the section, for the section speaks of alienation orhypothecation after the institution of the action. There is nothing-about hypothecation prior to the action or what a mortgageeunder such an hypothecation can do ”. Although that case dealtwith a question of intervention, it was necessary to decide thevalidity of the assignment. Section 17 of the Ordinance prohibit-ed “ alienation or hypothecation of an undivided share orinterest therein ” which is very much the same as Section 67 ofthe Act. I am unaware of and I have not been referred to anyauthority to the contrary. I would follow the decision of Ennis,J. and Garvin, J. In my view the deed of assignment No. 120 of25th March, 1961 is valid.
VYTHIAIilNGAM, J.—Haniffa v. Abdul Wahab
The plaintiff-appellant has sued the original mortgagor on themortgage bond. If only the assignment of the hypothecation tothe plaintiff-appellant from the assignor R be declared void,and following John Appuhamy vs. William Appuhamy, 7 CLW56, the plaintiff-appellant is declared entitled to a money decreeagainst the defendant-respondent, the land of the defendant-respondent is still subject to the mortgage in favour of R, theperson who assigned it to the plaintiff-appellant, while thedefendant-respondent has also to pay the monfey on the decreeto the plaintiff-appellant. In John Appuhamy vs. William Appu-hamy (supra), A mortgaged to B a share of his land while apartition action was pending. Though the mortgage was declaredto be void it was held that on the bond there was a valid promiseto pay. The result was, though a money decree was availableagainst A, his land was free of the mortgage. That is a differentsituation from the instant case where an assignment has alsoto be considered. Consequently, the above case cannot be applied.
At the trial only two issues were raised. One is about thevalidity of deed of assignment No. 120 and the other whether theplaintiff is entitled to judgment in case the deed is valid.Although in the answer the defendant-respondent has pleadedthat the money on the bond was paid, no issues have been raisedon that footing. No submissions were made on that or any matterother than this legal issue in this Court. Hence no questionarises of sending this case back for the determination of anyother issue. I am of the view that the deed of assignment isvalid. I allow the appeal and set aside the order of the learnedDistrict Judge and enter judgment for the plaintiff as prayedfor with costs in the District Court and costs of this appeal.
The defendant-respondent executed a mortgage of hisundivided interest in the lands subject matter of this action toone Razeena Umma by deed No. 15749, dated 18.10.48. She bydeed No. 17940, dated 17.81950 assigned all her interests underthe bond to Abdul Majeed who assigned those interests toRajanayake by deed No. 3192 of 21.5.1957. He by deed No. 120dated 25.3.1961 assigned all his interests to the plaintiff who suedthe defendant in this hypothecary action. The defendant admittedthe original mortgage but while pleading that he was unawareof the assignments took up the position that the deeds in favourof the plaintiff were void as they were executed pendingpartition.
At the trial it was agreed that the deed of assignment No. 120of 25.3.1961 in favour of the plaintiff was executed after theinstitution of partition action No. 5432 of the District Court ofKandy in respect of the land, an undivided share of which wasthe subject of the mortgage. The only issue was whether the
VYTHIALINGAM , J.—Hanijfa V. Abdul Wahab
assignment of a mortgage is caught up in the prohibition againstalienation pending partition, contained in Section 67 of thePartition Act (Cap. 69). The section renders void any voluntaryalienation, lease or hypothecation of any undivided share orinterest of or in the land to which the partition action relates.
The original hypothecation in 1948 was before the institutionof the partition action and it was contended that the assignmentdid not create any new hypothecation but only placed theassignee in the shoes of the assignor. Mr. Pelpola who appearedwith Mr. Guruswamy relied on the case of Don Carolis Vs.Sirisena, 2 Times Law Reports, 90. In that case the judgment •sets out that the mortgagee assigned his interests in the mort-gage, that the assignee put the bond in suit and the eighthdefendant became the purchaser at the sale in execution. Hesought to intervene in the partition action and it was held thathe could.
It was held in the case of Perera vs. Perera et al 9 N.L.R. 217by a Full Bench that section 17 of the old Partition Ordinanceprohibited only voluntary alienations and not forced sales asin the case of a Fiscal’s sale in execution. So that in that casethe eighth defendant as a purchaser at the Fiscal’s sale wasentitled to intervene in a pending partition action as such a trans-fer was not prohibited by section 17. However for the appellants,it was submitted that section 17 of the Partition Ordinance madethe assignment of the mortgage by the mortgagee void. Itis doubtful if this argument was entitled to succeed because theassignee had already put the bond in suit and obtained a decreein execution of which the share was purchased by the eighthdefendant. As A. St. V. Jayawardena points out in his book onPartition, Second Edition ^t page 312 “ If a land is mortgagedpending partition proceedings and on a mortgage decreeobtained, it is sold before or after final judgment, is the salevoid ? Not necessarily, as the sale may be treated as a sale inexecution of that portion of the decree which directs the paymentof money. ” It was not a case where the assignee sought to inter-vene and it was argued that he could not because the assignmentwas void.
However, it is unnecessary to press my views to thepoint of disagreement with Don Carolis case (supra), as it caneasily be distinguished. In that case, Ennis, J. in dealing withthe submissions said, Garvin, A. J. agreeing, “ In my opinionthat the argument also is not consistent with the terms of thesection for the section speaks of alienations and hypothecationsafter the commencement of the action. There is nothing abouthypothecations prior to the commencement of the action or whata mortgagee under such a hypothecation can do.”
VYTHIALlNGAM, J.—Banijfa v. Abdul Wahab
If I may so say with great respect as a matter of pure construc-tion of section 17 of the old Partition Ordinance the statementof the law is quite unexceptionable. All that it means is thatwhere there is a mortgage of an undivided share prior to thefiling of a partition action the mortgagee could assign hisinterests even after a partition action is filed. This is quiteconsistent with the terms of section 17 of the old PartitionOrdinance which sets out that “ it shall not be lawful for anyof the owners to alienate or hypothecate his undivided share or
interest therein” It is only an owner who is prohibited
from alienating or hypothecating his undivided share or interesttherein. A mortgagee is not an owner in that sense of a share orinterest but only has a charge on the land as security for hisdebt. His interest is only in that respect and for this reason
Ennis, J. said. “ There is nothing aboutwhat a mortgagee
under such hypothecation can do. ”
The prohibition under the new Partition Act which applies tothe instant case is entirely different. It states that after the lispendens has been duly registered “ no voluntary alienation,lease or hypothecation of any undivided share or interest ofor in the land to which the action relates shall be made oreffected….”. Here the prohibition is against any voluntaryalienation, lease or hypothecation by anyone whosoever in whomsuch share or interest is vested and not merely by the owneronly. Undoubtedly a mortgagee has an inte'rest in the land tothe extent of the charge in it as security for his debt. This isrecognised by section 5 (a) of the Act which requires the plaintiffto include in his plaint as parties any person entitled to “ anyright, share or interest to, of, or in the land to which the actionrelates whether vested or contingent and whether by way ofmortgage. .. . ”
The question then is whether an assignment is an “ alienation,lease or hypothecation ” of an undivided share or interest of orin the land to which the action relates.. . . ”. Mortgage is definedby Grotius as 1 a right over another’s property which serves tosecure an obligation. The person who creates the mortgage istermed the mortgagor and the person in whose favour it iscreated is termed the mortgagee R. W. Lee, An Introduction toRoman Dutch Law Fifth Edition, 183. In this case the obligationto which the mortgagee is accessory, generally known as theprincipal obligation, is the obligation to pay the sum of moneyborrowed or the debt which is due. When a mortgagee assignshis rights under the mortgage bond he transfers to the assigneehis right to recover the debt and also his interest in the landwhich serves to secure that obligation. It is, therefore, a transferof his interests in the land to the assignee and 'is thereforecaught up in the prohibition contained in section 67 just as muchas a hypothecation itself is caught up.
VYTHIALINGAM, J .—HaniJJa v. Abdul Wahab
The plaintiff, in paragraphs 8 and 9 of his plaint, has averredthat the share allotted to the defendant is subject to the originalmortgage bond No. 15749 in favour of Razeena Umma. The sub-sequent assignments including the one in favour of the plaintiffhave not been mentioned. The partition decree itself was notproduced in the case. But the defendant in his answer has notdenied this. However, the mere fact that his share is declaredto be subject to the original mortgage bond, does not precludethe defendant from taking up any of the defences available tohim in a mortgage action including that of denying the right ofthe mortgagee to sue him as the rights under the mortgage hadbeen assigned to someone else.
In para five of the plaint, the plaintiff has averred that thedefendant had notice of the assignment in his favour and althoughthe defendant has stated in his answer that he is unaware ofthe averments in para 5 of the plaint, yet it is quite clear thatthe defendant has had notice of the assignment to the plaintiff.In para six the plaintiff has averred that the defendant has paidthe stipulated interest up to the year 1962, and the defendanthas stated in para four of his answer that the plaintiff has notgiven credit for all the payments made. .
In the case of Periyanayagampillai vs. Silva et al. 22 N. L. R.481) Bertram, C.J. quoted Voet in regard to the rights on anassignment as follows “ Certainly according to our customarylaw on the subject of the assignment of actions, the opinion hasprevailed that the whole, title of the assignor is extinguishedby the assignment and that the assignor can no longer enforcepayment of the debt, but that only the assignee can do so, evenalthough notice has not yet been given by the assignee to thedebtor not to pay to the assignor, but nevertheless the debtor whois ignorant of the assignment in good faith pays the assignor iswholly discharged ; not so if notice has been given by theassignee not to pay the assignor. ”
Here, the mortgagor has notice of the assignment and theoriginal mortgagee cannot now sue him on the bond to whichthe partition decree makes the mortgagor’s share subject,because the right to receive the debt and to enforce the chargeon the land in respect of it has wholly passed from her andnow rests exclusively with the assignee. The assignment in thissense is a transfer of the mortgagor’s interest in the land to theassignee who could have intervened in the partition action. Theobject of the prohibition against alienation in the PartitionOrdinance is, as stated by Wood Renton, A.C.J., “ The clear objectof the enactment was to prevent the trial of particular actionsfrom being delayed by the intervention of fresh parties whoseinterests had been created since the proceedings beganAnnamalai Pillai vs. Perera, 6 N.L.R. 108 at 119
VYTHIAl.INGAM. J.—Haniffct v. Abdul Wahab
Dealing with section 67 of the Act, Wijayatilake, J. said inGooneratne vs. Gooneratne, 77 N.L.R. 271 at 273, “ The objectof this provision would appear to be to prevent the trial of apartition action being unduly prolonged and delayed by inter-vention of parties who derive interests in the land after theinstitution of an action. The object of this prohibition has beenexplained in 1878 in Baban vs. Amerasinghe, I.S.C.C. 24. “ Thesole purpose of this clause seems plainly to be, to reserve fulleffect to the legal proceedings for partition, when once instituted,and to take care that it shall not be in the power of any partyconcerned to defeat them or embarrass the course of them, bytransferring his share or any interest in the property to astranger.” If then the transfer of his interests in the land by amortgagee by an assignment is permitted pending action thewhole object of the Act would be defeated.
The question arises as to whether the entire instrument isvoid and whether the plaintiff is barred from recovering hismoney on the assignment. Jayawardena on Partition (supra)states at page 311, “ A mortgage bond consists of two distinctparts, one of which contains the debtor’s acknowledgement ofthe receipt of the consideration and of his indebtedness to thecreditor, and the undertaking to pay on demand or within aspecified time with or without interest, and the other containsthe hypothecation or security by which the debtor hypothecatesand binds his property in favour of his creditor. It is only thehypothecation or security that is declared void by this action.When a part of a contract is void, the whole instrument is notinvalidated. ”
In the case of John Appuhamy vs. William Appuhamy(7 C. L. W. 56) it was held that in the case of a mortgage of aland which is the subject of a partition action, only the hypothe-cation is void and not the instrument containing it and thatalthough the hypothecation is void there still remains to themortgagee an action on the promise to.pay. It was however heldthat in the circumstances of that case that the action for a moneydecree was prescribed. No such plea was taken in this case. Theplaintiff in this case is entitled to a money decree and no preju-dice is caused to him as in execution of the money decree he canproceed against any of the properties of the defendant as areliable to be sold in execution of the decree.
In the circumstances I would set aside the judgment and decreeof the learned District Judge and direct that decree be enteredfor the plaintiff in terms of para (a) of the prayer to the plaint.Each party will bear his own costs of appeal but the plaintiffwill be entitled to half the costs in the lower Court.
HANIFFA, Appellant and ABDUL WAHAB, Respondent