BASNAYAKE 3T–—Palingu, Menika v. Mudianse
1948Present: Basnayake J.PAUNGTJ METJTK A, Appellant, and MUDIANSE, RespondentS. C. 18—O. It. Teldeniya, 853
Sals—Agreement to re-transfer—Stipulation of interest—-Possession withvendor—-Is it mortgage ?—Test to be applied.
Where the question is whether a transaction is a mortgage ora transferwith an undertaking to re-sell within a specified time, the stipulationof interest and the retention of possession by the vendor are circum-stances which go a long way to negative the claim that the deed is apactum de relrovendendo. If there is any doubt the court should leanto the side which claims the transaction to be a mortgage.
PPEAB from a judgment of the Commissioner of Requests, Tel-deniya.
O.P. J. Kurukvlasuriya, for defendant appellant.
T.B. Dissanayake, for plaintiff respondent.
Our. adv. vult.
November 10, 1948. Basnayake J.—
The plaintiff-respondent, one E. M. D. Mudiyanse (hereinafter referredto as the plaintiff) instituted this action against three persons namedIdamegedera Palingu Menika, Idamegedera Bandara Menika, andAbesingedera Kalu Banda. He asks that he be declared entitled to anundivided half share of a land called Hapugallawelahena in extent oneacre, one rood, and thirty-nine perches, that the defendants he ejectedtherefrom, and for damages. He claims to be entitled to the land byvirtue of deed No. 16235 dated January 31, 1942, attested by Notary
R.A. E. Jayasinghe (hereinafter referred to as P 1) and by prescriptivepossession. The second and third defendants in their answer deny theallegations in the plaint and allege that the deed pleaded by the plaintiffrelates to a “ money-lending transaction ” and that the plaintiff holdsthe land claimed by him in trust for Palingu Menika and her heirs. Theyask that the plaintiff’s action be dismissed and that he be ordered toaccept the money due to'him and execute a re-transfer of the land.The first defendant having died after the institution of the action, herheirs were substituted as defendants.
The trial proceeded on the following issues :—
“ 1. Did Palingu Menika transfer the premises in dispute to the plain-tiff on deed No. 16235 on January 31, 1942 ?
2. Are the defendants in wrongful possession of the premises ?
“ 3. Damages.
“ 4. Was deed No. 16235 of January 31, 1942, an outright transfer toplaintiff ?
“ 5. Was deed No. 16235 a money-lending transaction ?
“ 6. Was there a valid tender of the money due on the said deed ?
“ 7. Was any sum paid out of the money due on the deed ?
“ 8. If there was no valid tender, can defendants ask for a re-trans-fer ? ”
WASWAYAK Hi J.—Paling it JSdeniha v. Hdudianse
The learned Commissioner held that Palingu Menika, the deceaseddefendant, transferred the land in dispute by P 1 and that the defendantswere in wrongful possession of the premises. He farther held that P 1was a conditional transfer and that the defendants were not entitled toa re-transfer as there had neither been a valid tender of the full sum duenor any part payment.
Before I discuss the questions arising on this appeal it will be usefulif I set out the relevant provisions of P 1. They are as follows :—
“ Know all men by these presents that we Mawanna Kana Thanga-samy Nadar of Henagehuwala in Pallispattu of Pata Dumbara andAbeysin Mudiyanselage Narangaha Cotuwegedera Palingu Menikaof Kudadeniya in Pallispattu aforesaid for and in consideration of thesum of Rs. 75 of lawful money of Ceylon, do hereby sell and transferunto Watapana Digane Cumburegedera Mudiyanse of Rambukwel!ain Pallispattu aforesaid the following premises reserving the right tore-purchase the same within a period of three years by paying the saidsum of Rs. 75 with interest thereon at the rate of cents 16 per Rs. 10per month from the date hereof.
“ Therefore we do hereby authorise unto the said vendee to hold andpossess the said premises from the date hereof free of dispute for everor to deal with the same at will and pleasure and we do hereby declarethat we have not done any act whatsoever prior to this and that in theevent of any such dispute occurring we shall and will warrant anddefend the title and settle such dispute, of us the said ThangasamyNadar possess the said premises from the date thereof free of disputeby virtue of a deed No. 3706 dated April 11, 1939, and attested by
M.A. S. Marikar, N.P., and the said Palingu Menika also by the saiddeed.”
Thangasamy Nadar became a party to P 1 because on a prior deedNo. 3706 dated April 11, 1939, attested by M. A. S. Marikar, NotaryPublic (hereinafter referred to as P 2), Palingu Menika had in similarterms conveyed the land to him for Rs. 50. The material provisionsof P 2 are as follows :—
“ Know all men by these presents that I, Abasin MudiyanselageNarangah akotuwegedara Palingu Menika of Kudadeniya in PallispattuWest of Lower Dumbara in the District of Kandy, Central Province(hereinafter calling myself “ the vendor ”) for and in considerationof the sum of rupees fifty (Rs. 50) of lawful money of Ceylon paidto me by Mawanna Kana Thangasamy Nadar of Henagehuwela ofPallispattu aforesaid (hereinafter called “ the vendee ”), the receiptwhereof is hereby acknowledged, do hereby sell, assign, convey,transfer, set over and assure unto the said vendee his heirs, executors,administrators, and assigns the premises in the schedule hereunderwritten particularly described together with all rights, privileges, ease-ments, servitudes and appurtenances whatsoever thereof or thereuntoin any wise belonging or used or enjoyed therewith, or reputed orknown as parb or parcel thereof, and all the estate, right, title, interest,claim, and demand whatsoever of me the said vendor in, to, out of,or upon the same, which said premises have been held and possessedby me upon Crown grant dated September 8, 1937.
BA SNA YAKE J.—Palingu Menika v, Mudianse
“ To have and to hold the said premises -with their and every oftheir appurtenances unto him the said vendee and his aforesaid subject-however to the right in me the said vendor or my heirs, executors,administrators and assigns to re-purchase the said premises withinthe term of three years from the date hereof on payment of the sum ofrupees fifty (Rs. 50) with interest at the rate of eighteen cents perrupees ten per month unto the said vendee or his aforewritten andNotarial expenses.
“ And I the said vendor do hereby for myself my heirs, executors,and administrators covenant with the said vendee and hia aforesaidsthat the said premises are free from every encumbrance whatsoever,,and that I shall always warrant and defend the same unto him thesaid vendee and his aforesaids against all and every other person orpersons whomsoever. ”
Although it is not so stated in P 1, the plaintiff admits that it wasagreed that Palingu Menika was to remain in possession of the land forthe three years within which Bhe was declared entitled to obtain a re-transfer. The plaintiff also admits that the sum of Rs. 75 was borrowedfrom him to pay off the loan of Rs. 50 due to Thangasamy Nadar on P 2in respect of the same land. A comparison of the two deeds revealsthat at the time of the execution of P 2 the full sum due to ThangasamyNadar may have been about Rs. 75 and that the rate of interest on P 1was more favourable than that on P 2. The latter deed stipulated a,rate of eighteen cents for every ten rupees while the former stipulated,a rate of sixteen cents. These are matters which favour and lend supportto the claim of the defendants that P 1 was executed in respect of a loan..
The plaintiff denies that any money has been paid to him on P 1,while the witnesses for the defence, J. M- T. Banda and E. M. TikiriBanda, assert that Rs. 65 has been paid. The plaintiff also denies thathe failed to comply with a request for a re-transfer of the land in November,1944. The learned Commissioner, who saw and heard the witnesses,has rejected the evidence of the defence witnesses and accepted theplaintiff’s evidence. The proctor for the defendants sought to provea document D 2 which purported to be a receipt for Rs. 65 signed by theplaintiff, but when the plaintiff denied the signature thereon he withdrewthe document but later produced it through witness E. M. Tikiri Banda..The learned Commissioner has rightly refused to act on that documentwithout proof of the signature thereon. X am not disposed to interfere-with the learned Commissioners’s findings of fact.
The question that arises for decision is whether the transaction evi-denced by P 1 is a mortgage or a transfer with an undertaking to re-sellwithin a specified time. It is settled law that if the transaction in ques-tion is in fact a mortgage, the right of the debtor to redeem cannot betaken away even by express stipulation x. On the other hand, if it isa contract of sale subject fco the condition that the vendor shall be entitledto receive back the land on paying the price, within the stipulated timein a case where a time is stipulated, the failure to pay the price withinthe time disentitles the vendor to a re-conveyance2. In order to
1 Ana Lana Saminathan Chetty v. Vander Poorten, (1932) 34 AT. L. R. 287 at 294.
* Jvre.rn.ias Fernando et aZ. v. Perera et <U., (1926) 28 N. L. R. 183.
Wijewardene v. Peiris et al., (1935) 37 N. L. R. 179.
BASNAYAJLE J.—Palingu Menika v. Mudianse
determine the nature of the transaction the circums tances leading up toand. surrounding the execution of the document under consideration andthe language employed, therein may all be taken into account.1
Although P 1 speaks of a sale and transfer of the land referred totherein for a sum of Rs. 75 it reserves to the vendors described thereinthe right to purchase the land within a period of three years by paying thesaid sum of Rs. 75 with interest thereon at the rate of 16 cents for everyRs. 10 per month. It is clear from the plaintiff’s evidence that Thanga-samy Nadar had no rights except those flowing from P 2 which the plain-tiff calls a mortgage though, as I said earlier, it is in the same terms asP 1. Plaintiff goes on to say in cross-examination that the money was“ borrowed ” from him to pay Thangasamy Nadar’s “ loan ”. Theplaintiff’s evidence that the rate of interest stipulated in P 1 is “ the rateof interest at which we lend money in the village ” is significant and isdefinitely in favour of the claim of the defendants. The plaintiff doesnot deny that although the deed gave him a right to enter into possessionimmediately on its execution the second vendor continued to remainin possession.
P 1 is not the form in which a pactum de retrovendendo 2 is expressed,for Voet says : “ Nearly allied to the pactum commissorium is the pactumde retrovendendo, * agreement for repurchase ( or Jus Redimendi), theeffect of which, when annexed to a purchase, is that the vendor maywithin or after a time fixed, or at any time, redeem or take back thething sold, on restoring the same price he actually received for it, andnot what may be the just price and equivalent to the commodity at thetime of the redemption, unless it has been expressly agreed otherwise.”
In my view the stipulation of interest and the retention of possessionby the vendor are circumstances which go a long way to negative theclaim that the deed is a pactum de retrovendendo. Besides, P 2 which isadmitted by the plaintiff to be in respect of a loan and the plaintiff’sevidence in regard to it, go to support the claim of the defendants thatthe transaction evidenced by P 1 is one between debtor and creditor.In such a case the policy of our law is against allowing the enforcementof an agreement between them to the effect that if the debt be not paidwithin the stipulated time the property affected by the transaction isto become the property of the creditor 3.
This principle of Roman-Butch law is found also in the civil law.Bomat says 4 : “ Although the thing pawned or mortgaged be given thatit may be sold in default of payment, yet the creditor cannot stipulate,that, if he is not paid at the term agreed on, the pledge shall from thence-forth be his in lieu of his payment. For such a covenant would be con-trary to humanity and good manners, seeing the pledge may chanceto be of greater value, or esteemed by the debtor to'be worth more thanthe debt; and because it is given to the creditor only for his security,and not that he may take advantage of the poverty of his debtor.”
Ana Lana Saminathan Chetty v. Vander Poorten, (1932) 34 N. L. R. 287 at 294.
Voet, Bk. XVIII, Tit. Ill, Sec. 7.
John v. Trimble <Ss others, (1902) 1 Transvaal High Court 146 at 156.
Siribohamy v-. Rattaranhamy, (1890-91) 1 Ceylon Law Reports 36.
Domat, Part I, Book III, Tit. I, Section III, Art. XI, Strahan'3 translation,paragraph 1709, volume I.
DIAS J.—Thwraisinghcum v. Karthikeau
In construing such an instrument as P 1, if there is any doubt thecourt should I think lean to the side which claims the transaction to be amortgage. In the instant case I have no doubt that the transaction isone between debtor and creditor. The plaintiff is not entitled to therelief he claims. All he may do is to sue the defendants for the debt dueto him together with the stipulated interest and sell the land in executionif the judgment debt is not paid. The plaintiff's action must thereforebe dismissed with costs.
The defendants ask that the plaintiff be ordered to accept the moneydue to him and execute the necessary re-conveyance. Although thedefendants have not deposited the money in court, in order to avoid theexpense of another action I order that the plaintiff do execute the necessaryre-conveyance of the land mentioned in P 1 on the deposit by the defen-dants in court of the full amount of the principal and interest due onP 1 on the date of such deposit.
The appeal is allowed with costs.
PALINGU MENIKA, Appellant, and MUDIANSE, Respondent