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KANNAPPEN v. MYLIPODY.
D. C., Batticaloa, 16,836.
Donation—Alienation of property with intent to defraud creditors—Groundsnecessary for setting aside a deed of gift.
Under the Romm-Dutch Law acts of, munificence are validthough prompted by an inhonesta affectio as circa meretrices equallywith acts of munificence inspired by an honesta affectio as erga benemerentes amicos ; but the Civil Law, in order to protect creditors,has in effect provided that alienation by gift may be set aside whena man gives away the whole or a considerable part of his estateknowing that he is insolent, and that he is diminishing thesubstance out of which his debts might be paid.
He who acts thus will be considered to have intended the naturalresult of his acts, which is the defrauding of his creditors. And insuch a case fraud on the part of the donor is sufficient to invalidatethe donation, though the donee had no knowledge of the fraud or ofthe circumstances whence it is inferred.
But neither a donation nor a sale would be considered fraudulentif the donor or vendor were solvent at the time he made it, and iftheir disposition had not caused him to cease to be so. It is onlywhen the property retained by the donor proves insufficient to meetthe claims of creditors that they can follow the property which hasbeen injuriously gifted away by him.
HE plaintiff averred that he obtained judgment against theestate of the late Kandapodi.in cases Nos. 1,106 and 1,107 in
the Court of Requests in Batticaloa and caused one-half of a certainland of his to be seized for sale in execution, but that defendantsunlawfully opposed the sale on the 2nd August, 1871. Where-fore he prayed that their opposition to the sale may be set aside,and the land declared liable to be sold under the two writs above-mentioned.
The defendants denied that the undivided half share was theproperty of Kandapodi, and justified their opposition under adeed of gift dated 17th October, 1868, granted by Kandapodi tothe defendants.
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On the trial day the parties were examined, but they called 1872.no witnesses. The District Judge’s judgment appeared to rest November 19.upon facts gleaned from the statements of the plaintiff and thesecond defendant and the Court of Requests case books Nos. 1,100and 1,107, but the facts themselves were nowhere expressly statedin his judgment or in any other part of the record. His judgmentwas as follows :—
“ Neither party calling witnesses, the Court gives judgment for" plaintiff upon the arguments raised, it being quite clear that the“ deed of gift could not exempt the land donated from liability to“ plaintiff’s claim as for a debt in existence at the date of gifting.
“ The question of necessity for proof of fraud having been raised“ by the defendants’ counsel, the Court decides that such proof is“ not necessary, since whether the gift were fraudulent or not, the“ donation is liable to plaintiff’s claim.
“ It is therefore decreed that the land in question is liable to be“ sold in execution under writs Nos. 1,106 and 1,107. Defendants’
“ opposition being set aside, they must pay all costs.”
Dias, for appellants.
Qrenier, for respondent.
Cur. adv. mdt
19th November, 1872. The judgment of the Supreme Court wasdelivered as follows by Creasy, C.J.:—
The plaintiff in this case states that he is a judgment-creditoragainst the estate of Kandapodi, and he prays that certain landshould be declared the property of Kandapodi and liable to besold under his (the plaintiff’s) writ, and that the opposition madeby defendants to the sale should be set aside.
The defendants plead that they are owners of the said landand they annex a deed of gift of the said land dated 17th October,1868. This deed purports to give the land to the defendants. Theyare required by it to deliver the produce to the donor during hislifetime . after his death they are to possess it according to theirpleasure; the deed says “ for ever,” but it gives estates inremainder after their deaths. One of the defendants is the nephewof the donor ; the other, at the date of the deed of gift, was livingwith him as his wife, but was not married to him.
The plaintiff replies that the said deed of gift was a fraudulenttransfer.
At the trial two Court Of Requests cases were put in, being thecases brought by plaintiff against the representatives of Kanda-podi in which he obtained judgment.
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1872. The parties were also examined at the trial, but no witnessesNovember 19. were oaUed. From the pleadings, from the Court of BequestsCreasy, C.J. cases, from the deed, and from the examination of the parties welearn that the plaintiff was a creditor of Kandapodi’s to the amountof £9. 2s. 6d. on two bonds, both of which had been granted forconsideration by Kandapodi to the plaintiff before the deed ofgift to the defendants. It also appears that at the time whenthe bonds were made to plaintiff Kandapodi had other property,besides the land subsequently gifted to defendants. The precisevalue of that other property does not appear, but it was clearlymuch more than the amount of Kandapodi’s debt to plaintiff,and there is no proof that Kandapodi owed any other debts. Itdoes not appear that Kandapodi had parted with any of that otherproperty in the interval between his giving the last bond to plaintiffand his making the deed of gift to defendants.
The issue which the parties were to try was clearly as to whetherthe deed of gift was or was not fraudulent and void as againstplaintiff, who was a creditor for value at the time of its execution..
The District Court has given no judgment whether the deedwas fraudulent or not, but has held the donation to be in anyevent “ liable to plaintiff’s claim,” and has therefore given judg-ment in favour of the plaintiff.
We think this judgment erroneous. We hold that the deed couldnot be successfully impeached, unless it were shown that Kanda-podi, in gifting away this land, defrauded his creditors; and wethink that not only is this left unproved, but that there is proofthe other way, and consequently we should not be justified insending the case back for further hearing.
The District Judge seems to have held absolutely that if a manowes any debt at all he cannot make any valid gift at all, but theproperty which he affects to give away will always be liable tothe claim of the donor’s creditors. If this be true, a man withthousands of pounds cannot make a perfectly valid gift of propertyworth a five-pound note, if he happen at the time to owe thatamount to his tailor or any other of his tradespeople. But thereis no such absurdity in our law. The authorities cited in supportof this theory are, first, a case in Austin, p. 23. On examining thatcase it appears that there were many special circumstances in it.The claimant under the alleged donation had allowed the land tobe sold by the executors, and had himself been a bidder at the salewithout saying a word about this deed of gift. Moreover, for allthat appears in the report the gift might have been extended to thebulk of the donor’s property. It is not surprising that under such
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circumstances the donee’s claim was dismissed with costs. Theother authority cited is a passage in Thomson, vol. /., p. 345, which isfounded solely on this case in Austin, and has no weight beyond it.
Dismissing the general proposition that gifted property, whethersmall or great, remains always liable to creditors, whether thedebts were small or great, we are by no means obliged to adoptthe equally monstrous theory that all gifts are valid as against allcreditors; and that a man in a state of insolvency may cheat allwho have trusted him by giving away his estate or even any con-siderable part of it. The Roman-Dutch Law will be found tofollow a just and equitable middle course between extremes.
In the present case, as in a Jaffna case decided by us this morn,ing (D. C., Jaffna, 20,463, reported supra at p. 271), sufficientattention has not been paid in the Court below to the Roman LawDe Donationibvs.
We pointed out in the Jaffna case the generally full liberty givenby that law to a man in the gratuitous exercise of munificence,and we showed how acts of munificence are valid though promptedby an inhonesta ajfectio as circa meretrices equally with acts ofmunificence inspired by an honesta ajfectio as erga bene merentesamicos (see Digest, XXXIX., tit. 5, section 5). A-copy of thatjudgment is annexed to the present judgment, and may be referredto as part of it. But besides the points common to this case andthe Jaffna case, we have here to consider the effects of theprovisions in the Civil Law to protect creditors. They are chieflycontained in the Digest, XLII., tit. 8, “ Qucb infraudem creditorum.“facta sunt, ut restituantur.’’ They are commented on by Voet,p. 682 of his second volume, and by Burge, vol. III., p. 605. Seealso Voet’s Commentary on book XXXIX. of the Digest, tit. 5, sections6, 19, and 2.,
Their effect, so far as is material to the present case, may bestated thus:—An alienation by gift may be set aside when a mangives away the whole or a considerable portion of his estateknowing that he is insolvent and that he is diminishing the sub-stance out of which his debts might be paid. He who actsthus will be considered to have intended the natural result ofhis acts, which is the defrauding of his creditors. And in sucha case fraud on the part of the donor is sufficient to invalidatethe donation, though the donee had no knowledge of the fraud orof the circumstances whence it is inferred. “ Si cui donatum sit,
“ non esse queerendum an sciente eo cui donatum gestum sit sed hoc“ tantum an fraudentur creditores ? nec videtur injuria affid“ is qui ignoravit quum lucrum extorqueatur non domnum injii-“ gatur " (Digest, XLII., tit. 8, section 6).
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But in the present case the first element neoessary for resti-tution on account of fraud is wanting.
Kandapodi was not insolvent at the time of the deed of gift,nor did the gift leave him insolvent.
Burge says expressly as to this :—“ Neither a donation nor sale“ would be considered fraudulent if the donor or vendor were“ solvent at the time he made it, and if their disposition had not“ caused him to cease to be so.” It does not even appear thatKandapodi ever, became insolvent, or that his estate in notperfectly solvent at the present time without having recourse to theland in question; and it would seem from Voet’s Commentary onDigest XLII., tit. 8, section 1, that it is only when the propertyretained by the donor proves insufficient to meet the claims ofcreditors that they can follow the property which has beeninjuriously gifted away by him.
KANNAPPEN v. MYLIPODY