Kailasan Pillai v. Palaniappa Chettiar.
1934Present: Macdonell C.J., Garvin S.PJ., Drieberg
and Akbar JJ.
KAILASAN PILLAI v. PALANIAPPA CHETTIAR.
153—D. C. (Inty.) Matara, 6,364.
Decree—Assignment in writing—Seizure of decree by creditor after assignment—Priority—Sanctionof Court for assignmentunnecessary—Civil
Procedure Code, ss. 234 and 339.
Where, after a decree has been assigned in writing, it is seized by acreditor of the assignor, the credtior is not entitled to priority merelybecause the assignee has made no application for execution under section 339of the Civil Procedure Code.
The holder of the earlier assignment has preference.
It is not necessary for the validity of an assignment of a decree thatit should be sanctioned by Court.
ASE referred by Akbar J. and de Silva A.J. for determination by aBench of four Judges.
The material facts as stated by Akbar J. are as follows:—Plaintiffobtained a mortgage decree against the defendant on March 11, 1931,but he assigned this decree to the appellant by bond No. 309 of September2, 1931, which was duly registered by the appellant. The respondent to
MACDONELL CJ.—Kailasan PUlai v. Palaniappa Chettiar.
this appeal who was a judgment-creditor of the original plaintiff in thecase now in appeal having got judgment in D. C. Galle, No. 28,986 issued.a notice under section 234 of the Civil Procedure Code seizing themortgage decree on October 8, 1931. On March 1, 1932, the appellantmoved to be substituted as plaintiff, which motion was allowed on May 2,1932. On June 24, 1932, the respondent moved under sections 234 and339 of the Civil Procedure Code for writ to sell the land.
The question for decision was whether the seizure effected by therespondent on October 8, 1931, prevailed over the assignment ofSeptember 2, 1931.
Kurukulasuriya (with him T. S. Fernando), for substituted plaintiff,appellant.
(with him D. W. Fernando and S. A lies), for creditor,
Cur. adv. vult.
.March 12, 1934. Macdonell C.J.—
This matter raised a contest between the assignee of a mortgage decreeand a judgment-creditor who had seized that decree under section 234 ofthe Civil Procedure Code. It was argued before Akbar and de Silva JJ.and was by them sent before a Full Bench.
The facts were these. On March 11, 1931, the original plaintiff obtaineda mortgage decree against the defendant in this case. On September 2,1931, he assigned that decree to the appellant in this matter who registeredit on September 11, 1931. Thereafter on February 1, 1932, the appellantfiled his assignment in Court and moved under Civil Procedure Code,section 339, for notice on the defendant to show cause why he the appellantshould not be substituted as plaintiff of record and be allowed to takethe necessary steps to execute the judgment. The defendant was dulyserved with this notice but did not appear, and on May 2, 1932, theappellant was substituted as plaintiff of record in place of the originalplaintiff.
It is now necessary to give the facts affecting the respondent to thisappeal. He, on October 23, 1930, had got judgment against the originalplaintiff in this action for Rs. 515.40 in a case D. C. Galle, No. 28,986.About a year .afterwards, on October 8, 1931, he issued a notice undersection 234 of the Civil Procedure Code seizing the mortgage decree ofMarch 2, 1931, pronounced in favour of the original plaintiff in this action.It will be observed that this notice was later than the assignment of thedecree to the appellant but was earlier than the appellant’s applicationunder section 339 of February 1, 1932. The respondent, having issuedthis notice of seizure, did nothing till June 24, 1932, when he applied inthis action under sections 254 and 339 of the Civil Procedure Code for awrit to have the land, the subject of the mortgage, sold. It will beremembered that the appellant had been substituted as plaintiff of recordin this action some six weeks earlier. These facts raised a clear issuebetween the two parties, the appellant who was by now substitutedplaintiff of record and the respondent who had seized the mortgage decree.The contest between them was argued on September 19, 1932, at which
MACDONELL C J.—KaiUuan Pillai v. Palaniappa Chettiar.
the case Walpole v. Cooke1 was cited and it was argued that the transferby assignment of the decree could not be complete until sanctioned bythe Court, which sanction was not obtained until after the respondenthad seized the decree on October 8, 1931. The order appealed from wasas follows:— “The seizure of the decree which was notified on October 3,1931, must prevail over the assignment of it which was not notified toCourt till February 1, 1932
The first thing to observe is that the assignment in this case wasadmittedly complete. It has been notarially executed and in terms is afull cession, showing an intention by the assignor the original plaintiff topass all the rights he has to the appellant assignee. It had also beenregistered. For the assignee it had to be conceded that he had donenothing to inform the Court from which the decree issued of the fact ofthis assignment until February 1, 1932. The section applicable to thiscontest is section 339 of the Civil Procedure Code—
“339. If a decree is transferred by assignment in writing or byoperation of law from the decree-holder to any other person, thetransferee may apply for its execution by petition, to which all theparties to the action or their representatives shall be made respondentsto the Court which passed it, and if on that application that Courtthinks fit, the transferee’s name may be substituted for that of thetransferor in the record of the decree, and the decree may be executedin the same manner and subject to the same conditions as if theapplication were made by such decree-holder.
Provided that where the decree has been transferred by operation oflaw, the transferor need not be made respondent to the petition.
Provided also that where a decree against several persons has beentransferred to one of them, it shall not be executed against the others.
In the case where one decree of court is seized in execution of anotherdecree, the judgment-creditor of this second decree is in the situationof assignee of the judgment-creditor of the decree which is seized,provided the letter person is identical with the judgment-debtor of thedecree in execution of which the seizure is made. ”
The opening words of this section are important, “if a decree istransferred by assignment in writing or by operation of law from thedecree-holder to any other person. ” Clearly it is not from this sectionthat any right to make an assignment is derived; that right must be dueto some other law, for the words of the section contemplate an assignmentwhich is already made. The section then goes on to say what are thepowers of the Court with regard to the claim of the assignee and saysthat, if the Court thinks fit, it may substitute the assignee’s name for thatof his assignor in the record of the decree and give him the right of execu-tion previously possessed by the assignor. But the section, it will beobserved, is purely procedural. The assignment must have been madebefore the section is invoked and the effect of the assignment, as trans-ferring the original rights of the decree-holder to his assignee, must dependnot upon this section 339 but upon the validity in form and substance ofthe assignment itself. Now the effect of an assignment if otherwisecomplete, as the present assignment is admitted to be, is to transfer the
• (1929) 31 N. L. R. at p. 378.
MACDONELL CJ.—Kailasan Pillai v. Palaniappa Chettiar.
rights named in that assignment to the assignee. In the common phrase,he steps into the shoes of the assignor and is henceforward clothed withall the rights of the assignor in the matter assigned. If the assignmentis complete, as the present assignment is admitted to be, then from themoment of that completion there is nothing left to the assignor of hisoriginal rights, the subject of that assignment, for they have passed in tototo the assignee. This consideration really disposes of the question putbefore us. The assignment being complete there was nothing for therespondent to seize when he issued his notice on October 8, 1931, undersection 234, seizing the mortgage decree in this action. The point isquite clearly put by Schneider J. in Wimalasuriya v. Purolis which was acase where money seized in execution of the plaintiff’s writ had beendeposited in Court but where the plaintiff had in the meantime dulyassigned the decree, and the gist of the matter is contained in the wordsat page 122, 44 Till the assignment is set aside the substituted plaintiff istne owner of the money and was its owner at the time of the seizure bythe judgment-creditor. It follows therefore that at the date of seizurethe property seized was not that of the judgment-debtor ”.
For the respondent reliance was placed in section 254 of the CivilProcedure Code. The judgment-creditor who has seized the decree is tobe deemed the assignee thereof, the section says, but it then proceeds to.lay down the limits within which he is to be deemed such assignee. Heis to be such 44 as of the date of seizure ” and so far as the 44 interest ” ofthe person against whom he is executing the writ of execution extends.Applying section 254 to the facts of the present matter, the respondentwill be assignee of the decree he has seized only from October 8, 1931,whereas the appellant became assignee on September 2, 1931, and evenfrom that October 8 the respondent will be assignee only as far as theinterest of the person against whom he is executing extends. But thatperson, the original plaintiff, had parted with all his “interest” somesix weeks earlier. There was no 44 interest ” then remaining for therespondent to become assignee of.
It was necessary to reserve to a Full Bench the point before us becauseof certain dicta in Walpola v. Cooke (supra). That was a case where theplaintiff had obtained judgment on a mortgage bond and had thenmortgaged the decree with a third party, who will be called B.Subsequently C, .who was himself the holder of a decree against theplaintiff, seized the mortgage decree which had been mortgaged to B,got himself substituted as plaintiff in the action and had the securityrealized, and it was held that C had a preferent right to the proceedsof the sale overriding that of B the mortgagee of the decree. Inthat judgment the following passage occurs at page 383:—“ The onlyway so far as I can see in which the mortgagee can complete his securityis by taking proceedings under section 339. Until he does so he is notsecured. In other words, possession of the decree remains in themortgagor. Possession is transferred not by the deed but by the Courtand at the Court’s discretion. It is no doubt true that the RegistrationOrdinance does not declare mortgages ofy choses in action void unlessthere is either delivery or registration, but it remains to be ascertained
' 2 C. L. Pier. m.
346GARVIN S.P.J.—Kailasan Pillai v. Palaniappa Chettiar.
what security is created in such a case, and to ascertain this we arethrown back upon the Common law. As indicated above, I do not thinkthat any right in rent was acquired by B. The document merely gavehim an opportunity to acquire such a right by going to the Court andby being substituted as plaintiff, but he did not avail himself of hisright ”.
With all respect the passage in Walpola v. Cooke quoted above is amisapprehension of section 339, particularly where it says that possessionof the decree is transferred not by the deed but by the Court, for theanalysis of the question should have begun a stage further back askingwhat did the deed itself—a mortgage—transfer, and then it would havebeen perceived that the mortgage deed had transferred, not the decreeitself, that certainly could only be done by the Court, but that it hadtransferred the substance of the decree, the beneficial interest in itssubject-matter if the phrase be permitted, and this analysis would thenhave shown that C when he did seize the decree was seizing somethingempty of content because its substance had previously passed to another.
I would also respectfully dissent from the statement that the document“ merely gave him an opportunity to acquire such a right by going to theCourt and by being substituted as plaintiff”. I think it is dear, asI have said, that it is the document itself which gives him the rightindependently of his going to Court and asking to be substituted asplaintiff.
The point before us seems to be clearly ruled by the general law as toassignments as also by the words of section 339 itself properly appre-hended. If further authority be needed I would respectfully adopt the -words of Schneider J. in the case in 2 Ceylon Law Recorder, p. 121, citedabove.
My answer to the questions before us would be then that the assignmentto the appellant of September 2, 1931, should be held to prevail over therespondent’s seizure of the mortgage decree of October 8, 1931, and thatthe order in this case of September 19, 1932, should be reversed with cost§here and below.
A point of law which arose in the course of the argument which tookplace before Akbar J. and de Silva A. J. has been reserved for determina-tion by this Bench of four Judges. The material facts are set out asfollows by Akbar J: —<
“ Plaintiff obtained a mortgage decree against the defendant on March11, 1931, but he assigned this decree to the appellant by bond No. 309of September 2, 1931, which was duly registered by the appellant. Therespondent to this appeal, who was a judgment-creditor of the originalplaintiff in the case now in appeal having got judgment in D. C. Galle,No. 28,986 issued a notice under section 234 of the Civil Procedure Codeseizing the mortgage decree on October 8, 1931. On March 1, 1932, theappellant moved to be substituted as plaintiff which motion was allowedon May 2, 1932. On June 24, 1932, the respondent moved under sections254 and 339 of the Civil Procedure Code for writ to sell the land. ”
GARVIN S.P.J.—Kailasan Pillai v. Palaniappa Chettiar.
The question for determination is whether the seizure effected bythe respondent on October 8, 1931, prevails over the assignment ofSeptember 2, 1931.
The assignment in favour of the appellant is unexeptionable. .Therewas a right to assign, namely, the plaintiff’s right in the decree entered inthis case. The intention to part with that right to the appellant has beenclearly manifested and there has also been a cession of the right. Thisis evidenced by a document in writing in the most solemn form knownto our law, which is a writing attested by a notary and two witnesses.Further, the appellant moved the Court under the provisions of section 339of the Code and, by virtue of the assignment in his favour, had beensubstituted on the record in the place of the Original plaintiff. It wasurged however, that the seizure effected by the judgment-creditor inD. C. Galle, No. 28,986, who is the respondent to this appeal operates asan assignment to him of the decree as at and from October 8, 1931, beingthe date on which that seizure was effected. Section 254 of the CivilProcedure Code which is relied on as authority for this proposition doesundoubtedly support it to the extent that it is declared that “when theproperty seized is a decree of court the judgment-creditor at whoseinstance the seizure is made shall be deemed to be the assignee thereofunder assignment as of the date of the seizure made by the personagainst whom he is executing the writ of execution, so far as that person’sinterest extends and he may realize the decree in the manner hereinafterprovided for the execution of a decree by an assignee thereof”. Therespondent at whose instance this decree was seized must be deemed tobe the assignee thereof under assignment as of the date October 8, 1931.But the appellant is an assignee under assignment dated September 2,1931, and his assignment, being prior in date, would presumably takepriority over the respondent’s assignment. Indeed section 254 seems tosay so almost in terms for the seizing creditor is only to be deemed theassignee by assignment (a) “ as of the date of the seizure ”, and (b) “ sofax as that person’s interest (i.e., the interest of the holder of thedecree under seizure) extends ”. At the date of the seizure the interestof the original plaintiff in this decree had ceased for he had assignedit by assignment No. 309 of September 2, 1931. In Coder v. Saibu1Schneider J. when dealing with one Of the arguments adduced by Counselfor the appellant said with reference to a creditor who had seized a decreethat he “ was never an assignee of the decree, because at the date of hisseizure his debtor had no interest in the decree ” having divested himselfby an assignment of earlier date.
The assignment in favour of the appellant has not been challenged onthe ground that it is in fraud of creditors or on any ground upon which itmight legally be impeached. It is therefore unexceptionable and beingan assignment in writing of a decree prior to the seizure is entitled topreference.
It was argued however that an assignment in writing of a decree is notcomplete until it has been notified to the Court which passed the decree.Certain passages in the judgment of Lyall Grant J. in Walpola v. Cooke;have been referred to us supporting this proposition and in particular the
» (1923) 25 N. L. It. 30.2 (192S) 31 N. L. R. 378.
348GARVIN S.PJ.—Kailasan Pilloi v. Palaniappa Chettiar.
following: —“ It seems to me that the effect of this section (339) is thatthe transfer of a decree is not complete until -the Court after considerationhas sanctioned it ”. ' Nowhere in the Code is there any provision for thenotification to the Court of the assignment of decrees. But provision hasbeen made for the execution of a decree by the assignee thereof whetherthe assignment be in writing or by operation of law. Indeed, even in thecase of a person at whose instance a decree is seized what is provided isthat “ he may realize the decree in the manner hereinafter provided forthe execution of a decree by an assignee thereof ”—section 254. In effectthis section places a person who procures the seizure of a decree in thesituation of an assignee thereof who may if he desires to realize -the decreedo so in the manner provided for the realization of a decree by an assigneethereof. The procedure for the realization of a decree by an assignee islaid down in section 339 as follows : —
“ If a decree is transferred by assignment in writing or by operationof law from the decree-holder to any other person, the transferee mayapply for its execution by petition, to which all the parties to the actionor their representatives shall be made respondents to the court -whichpassed it, and if on that application that court thinks fit, the transferee’sname may be substituted for that of the transferor in the record of thedecree, and the decree may be executed in the same manner and subjectto the same conditions as if the application were made by such decreeholder. ”
The opening words of the section indicate that the only persons towhom its provisions are available are those to whom a decree had beentransferred by assignment in writing or by operation of law. Indeed,it is required of a person who seeks to avail himself of its provisions thatthe decree shall have been transferred to him by assignment in writingor operation of law. I am unable to agree with Lyall Grant J. that thereis anything in section 339 which suggests that a transfer of a decree byassignment in writing or by operation of law is not complete “ until theCourt after consideration has sanctioned it”. It does not say so. Whatappears to be implicit in the section is that a transfer of a decree if madeby assignment in writing or by operation of law is complete and gives thetransferee a right to avail himself of the provisions of the section. Therequirement of the section that all parties to the action or their repre-sentatives shall be made respondents to the application is intended tofurnish them with an opportunity to object to the application. They orany of them may for instance desire to impeach the assignment; theymay object that the decree has been duly paid or satisfied' or raise anyother valid objection to the substitution of the applicant as plaintiff onthe record. But in the absence of any valid objection the applicant asthe transferee of the decree would clearly be entitled to realization of thedecree in the manner provided by the section.
A transferee of a decree whether by assignment in writing or byoperation of law is only bound to proceed under section 339, if and whenhe desires to obtain execution of that decree. An assignee who does notpromptly proceed under section 339 imperils his interests in that thedecree may be executed by the original plaintiff or by the application ofa subsequent assignee.
MAARTENSZ AJ.—Commissioner of Income Tax v. de Vos.
But so long as the decree remains unexecuted and unsatisfied as in thecase before us the respective claims of competing assignees to be permittedto execute the decree and take the'benefit thereof must be determined inaccordance with the principles of the general law.
There are here two persons claiming to be transferees of the decree—the one by an assignment in writing, to which no exception has been orcan be taken, dated September 2, 1931; the other deemed to be assigneeas of the date of a seizure effected at his instance on October 8, 1931.
The holder of the earlier assignment clearly has the preferent right.The order of the District Judge will be set aside and this appeal allowedwith costs in both Courts.
Diueberg J.—I agree with the judgment of my Lord the Chief Justice.Akbak J.—I agree with the judgment of my Lord the Chief Justice.
KAILASAN PILLAI v. PALANIAPPA CHETTIAR