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*898.RAMEN CHETTY v. CAMPBELL.
March 22 and.
Juhi 2.Between Ramen Chetty, Plaintiff, and Fernando, Claimaiit.
D. C., Colombo, C(8,118.
Mortgage of movables—Sale after mortgage—Registration—Delivery ofpossession—Priority-—Ordinances Nos. 8 and 21 of 1871-—Sequestration—Claim to property sequestered—Question at issuein such case—Civil Procedure Code, ss. 64S and 648.
C, by a writing dated 9th January, 1896, and duly registered,hypothecated with plaintiff a billiard table and certain articles ofhousehold furniture to secure the payment of a debt. On 5thAugust, C, by a notarial instrument, also duly registered, sold to Fa just half share of the said property, and on 1st September, byoral agreement, the other half ; and subsequently F, who on eachoccasion of sale had paid the price of the property purchased,assumed possession of the entirety of such property. Thereafter,to wit, on 13th November, plaintiff commenced his action againstC to realize his security, and obtained under section 645 of theCivil Procedure Code a sequestration of the property hypothecated.Under the sequestration the Fiscal seized the goods in the possessionof F, and F applied to the District Court to have the sequestrationdissolved—.
Held, that at the time of the sequestration F was the owner ofthe property, and plaintiff could not follow it and make it liable for-his mortgage debt.
Held further by Bonser,' C.J.—(1) That the Fiscal had, in thecircumstances, no right to seize the goods. ’ All that he had powerto do was to give written notice to the possessor of the sequestrationhaving been issued.
(2) The only question to be decided by the Court in the above’proceeding was whether F was the owner of the propertysequestered or not.
r^THE facts of the case sufficiently appear in the judgments.
Domhorst and Jayewardena, for appellant.
Wendt and Sampayo, for respondent.
Cur. adv. wit.
2nd July, 1896. Bonser, C.J.—
In this case the plaintiff is .the holder , of a registered mortgageof certain movable property granted on the 9th January, 1895, byone Campbell, who was the owner of the property, to secure asum of money and interest.
It was proved that at that date Campbell was carrying on thebusiness of a hotel-keeper at “ The Retreat Hotel ” in Kollupitiya.Some time afterwards he removed, taking with him the articlesenumerated in a schedule to the mortgage, to “ The AustraliaHotel ” in the Fort. Being in want of money he induced theappellant, one Fernando, who was the Sinhalese manager of aEuropean business firm, to advance him some money and enterinto partnership with him.
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On the 5th August, 1895, a notarial deed was executed "byCampbell and the appellant, whereby Campbell sold a half shareof his furniture and stock-in-trade in “ The Australia Hotel ” andits goodwill, which included all these articles, to Fernando, andit was thereby also agreed that they should enter into a partnershipat will in the business.
On the 1st September following Campbell, according to appellant’sstory, being in want of money, sold the other moiety of the businessand business effects to the appellant, who took him on as manageron a monthly salary. On the 29th October Campbell left theIsland, and has never returned.
On the 13th November the mortgagee commenced an actionto realize his security, and on 4th December obtained undersection 645 of the Civil Procedure Code a sequestration of theproperty subject to the mortgage.
Under this sequestration the Fiscal seized the goods, the subjectof this appeal, in “ The Australia Hotel ” in the possession of theappellant. The appellant applied to the District Court of Colomboto have the sequestration removed. I may here observe that theFiscal, had no right to seize those goods, which were, according tothe return of his own officer, in the possession of the appellant.All that he had power to do was to give a written notice to thepossessor of the sequestration having'been issued.
Now, as I understand the procedure, the only question to bedecided in this proceeding was as to whether Fernando was theowner of the property or not. (See section '648, Civil ProcedureCode.)
The District Judge, however, instead of deciding that question,dismissed the appellant’s claim on the ground that the registeredmortgage prevailed against the subsequent purchase. He did notdecide the question as to whether the appellant was the owner ofthis property or not. He merely says that if he had to decidethat question, he should have been constrained to hold that theproofs of sale were insufficient; that it might be very true thatCampbell pretended to sell to the appellant who found the financesfor “ The Australia Hotel,” but that if one of two persons wasto suffer by Campbell’s conduct, he must regard with preferrent'favour the mortgagee, who obtained his bond and registered it.
With regard to the questibn of law decided by the learned Judge,
I am of opinion that the view he takes of the effect of OrdinanceNo. 8 of 1871 is incorrect. He appears to be of opinion that thatOrdinance conferred on mortgagees rights which they did notbefore possess.
March 2&andJuly 2.
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Now the law as to mortgages of movable chattels at the date ofthe passing of Oridnance No. 8 of 1871 is stated in a judgment ofthe Privy Council delivered by Lord Kingsdown in Ledward’scase (2 New Rep. 554).
The general rule of the Civil Law is, that possession of movablesis not necessary to the validity of a lien whether created bycontract or act of law, and that such lien will attach upon mov-able property, even in the hands of a bond fide purchaser withoutnotice. This rule has been modified by the Roman-Dutch Law tothis extent: that if the goods left in the possession of the mortgagorare sold or mortgaged by him to another person, they cannot befollowed into the hands of such transferree for value, but thecontract is binding on the debtor, and the goods themselves may betaken if they remain in his hands. This is the law as collectedby Mr. Burge from the authorities to which he refers, and. whichthese authorities fully seem to warrant.
Therefore, unless Ordinance No. 8 of 1871 gives some new rightsto a mortgagee, it is clear that the mortgagee in this case cannotseize this property in the possession of the appellant if he haspurchased and paid for it.
Now, the object of that Ordinance appears to me to be, not toconfer a benefit on mortgagees and purchasers, but rather toimpose restrictions and disabilities on them by requiring certainformalities to be complied with as necessary to the validity oftheir mortgages and purchasing deeds. Indeed, -one class ofmortgage is altogether forbidden.
I can find nothing in the Ordinance which shows any intentionof conferring any greater validity than it before possessed on amortgage which complies with the conditions of the Ordinance.
It is impossible to believe that the Legislature could' haveintended to make, without express words, such a serious change inthe law as was contended for by the respondent’s counsel. Somuch for the question of law. Then, the real question in thisproceeding arises for determination: , Was the appellant theowner of the property at the date of the sequestration ? It wascontended by. the respondent that the purchase and sale by theappellant was not proved. There was a long argument based onthe assumption that the deed by which the half share of the goodswas transferred to the purchaser was not registered as required byOrdinance No. 8 of 1871, and it was contended on the one side-that a purchase deed of movables without delivery of possessionwas not valid by reason of Qrdinance No. 8 of 1871 unless regis-tered as required by that Ordinance; and on the other, that atransfer or a sale and purchase of movables was not within that
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Ordinance. In my opinion there can be no possible doubt thatthe Ordinance, like the English Act of which it is a copy, appliesto purchase deeds. Baton the present case it has been ascertainedthat the purchase deed was duly registered.
In my opinion there is no reason to disbelieve the appellantwhen he swears, as he does, that he purchased and paid for thesearticles. It was further urged that these goods, when they-wereseized,- were in the possession of Campbell, but the appellantswears that on the 1st September he took possession of them,Campbell being employed by him as his paid servant to managethe business as from that date. If that be true, Campbell at thatdate ceased to possess, for himself and his possession became thatof the appellant.
His statement is borne out by the fact that from that dateCampbell ceased to pay . rent for the hotel premises, and thatthe rent was thenceforward paid by the appellant, and the receiptswere given in his name, whereas previously to that date they hadbeen made out in the name of Campbell. Moreover, as I havepointed out above, the Fiscal’s officer reported that the goodswere m the appellant’s possession at the time of seizure.
Further, it would appear that at the time the property wassequestered the appellant had taken out a license for the hotelin his own name, the license having been originally taken out inthe name of Campbell. The plaintiff was not shaken in cross-examination, and I see no reason for disbelieving his account ofwhat took place. If he is to be believed, he was at the time of thesequestration in possession of this property, and was at the sametime its owner by a legal and onerous title, and that being so themaxim Mobilia non habent sequelam applies, and the mortgageecannot follow it and make it liable for his mortgage debt. Nodoubt part of the consideration consisted of money alreadyowing by Campbell to the appellant; but I know of no law which'invalidates a sale made partly in consideration of an antecedentdebt.
The appeal must be allowed with costs.
Campbell had been carrying on business for some time as anhotel-keeper. His stock-in-trade, so to-speak, consisted of furni-ture including a billiard table. He had borrowed ar considerablesum Of money from the plaintiff and had given a mortgage overthe furniture and billiard table, which mortgage was dulyregistered under Ordinance No. 8. of 1871. In August, 1895,Campbell assumed Fernando as a partner. An instrument of
March 23 andJuly 2.
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partnership and sale was executed by both. By that Campbell, inconsideration of a price acknowledged to have been receiVed, soldto Fernando one-half of the furniture, &c. When the case wasargued before us it was assumed (I know not how) that thisindenture with its included sale of the furniture had not beenregistered, but it has since been discovered that the indenturewas duly registered under Ordinance No. 8 of 1871, and the chiefdifficulty which I felt is now removed. That registration madethe sale of one-half of the movables complete, and the mortgageethereby lost hypothecary rights over that half, because the halfhad been acquired by Fernando under a valid title. It is true thatthe assumption of Fernando was not publicly notified ; he did notenter on active management of the hotel. No ostensible changeof possession took place—possession remained as before in Camp-bell, but the registration was in law a sufficient notification andperfected the contract of sale. Fernando says that the partnershipwas dissolved by mutual consent on the 1st September by-anagreemerit that Campbell should sell his interest in the hotel andin the furniture to Fernando ; that Fernando should thus becomethe sole owner for a price fixed ; and that Campbell shouldremain manager with a salary and free board for himself and hiswife. Fernando swears that the full price agreed on was paid byhim ; he did not produce receipts from Campbell, but he provedthat he had paid Campbell considerable sums of money on accountOf the hotel; and although the proof of payment does not seem tome to be as complete as I should have wished it to be, still I seeno reason why Fernando’s uncontradicted evidence should not bebelieved. After the sale of the remaining half of the furnitureand of the goodwill, &c., of the hotel, there was still no ostensiblechange. To the world (at least to those who had not searched theregister of bills of sale) Campbell was still the owner. He con-tinued the tenant of the building, the license was in his name.He and his wife continued to live in and to manage the hotel.Fernando, the new owner, did not live there—he only wentoccasionally. I do not doubt that these arrangements were honest,but they were not intimated to the mortgagee over the furniture.The question is, Has that mortgagee lost the benefit of his security ?I think he did when Fernando concluded the contract of sale bypaying the price. It was argued that by our law delivery isessential to a perfect sale. I do not agree to that. But it is notnecessary to give that opinion, because here Fernando got deliverybefore the mortgagee sought to enforce his hypothec. Campbell. left Ceylon in October, and has not returned. He gave over toFernando, and Fernando then entered into possession ; he paid the
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arrears at rant and took out a new license in his own name. Ontaking possession of the furniture which he had agreed to buy andwhich he had paid for, the contract (if till then imperfect) thenbecame perfect. My doubts as to the validity of Fernando’s title incompetition with the plaintiff mortgagee have been removed by thediscovery that the indenture was registered, and by fuller argu-ment. 1 agree to set aside the order appealed from and to sustainthe claim and the sequestration.
This appeal is from a judgment of the District Judge otColombo in an incidental action arising between a pledgee andthe party in whose custody the property sought to be realizedby the plaintiff has been sequestrated under section 645 of theCivil Procedure Code. The appellant having claimed theproperty so sequestrated, his right has been tried in theseproceedings in the manner provided by section 648. By thedecree the sequestration is sustained, and the appellant’s claim ofright to the property is rejected. The property sequestratedconsists of a billiard table and certain articles of householdfurniture which at the time of sequestration were in a house inthe Fort of Colombo known as ’ “ The Australia Hotel.” Therespondent’s debtors, one Norman and Minnie Campbell, by awriting bearing date 9th January, 1895, and duly registered,hypothecated with the respondent a billiard table and numerouspieces of furniture to secure the payment of a debt. At that datethe hypothecated articles were in a house in Kollupitiya. It wasnot conceded by Mr. Domhorst that the chattels sequestrated inthe Fort are identical with the chattels mentioned in the contractof hypothec. Of course, if they are not the same, this incidentalaction must be decided in favour of the defendant. If they arethe same, it is for the defendant, in face of plaintiff’s contract ofhypothec, to show cause why he should not be required to reserveand retain the chattels to abide the further order of the Court inthe original action of the respondent against his joint debtors.The appellant resists the maintenance of sequestration on theground that the chattels are in his possession and are his property.His right of property he rests on a bond fide purchase from therespondent’s debtor, Norman Campbell, after the plaintiff’s allegedcontract of hypothec, but before the institution of the action torealize the hypothec—that is, the 13th November, 1895. Thejudgment contains no precise decision as to the identity of thearticles or as to the contract of purchase and sale pleaded by theappellant. The sequestration has been upheld because, in. the
March 2 Sand
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1&6.. learned Judge’s opinion, the registered contract of hypothec isentitled to' prevail over the subsequent purchase and sale, ceven if
the purchased chattels have passed from the possession of the
pledgor to that of the purchaser. In the opinion of the learnedDistrict Judge, the Ordinances Nos. 8 and 22 of 1871 give suchefficacy as this to a written and registered contract of hypothec.This I conceive to be a mistake. Ordinance No. 8 of 1871,. inrequiring certain written contracts to be registered, does notincrease the value of those contracts. Their value is what it wasbefore the Ordinance came. into operation. What then was thevalue of a written contract of hypothec at that date ? So long asthe chattel remaitfed with the pledgor, the contract created a lienover it and gave the pledgee a priority over it, so that as creditorhe was enabled to have it judicially sold and appropriate theproceeds in payment of the debt for which the chattel wassecured. But the pledgor was free to dispose of the chattel; andif it was bond fide, sold and delivered to a third party, it becamethe property of the latter, and was no longer tied to the debt forwhich it had been secured. Then comes the question, Were thesechattels in the appellant’s possession under a bond fide contract ofpurchase and sale at the time of the institution of the respondent’saction ? Still asuming the identity of the chattels, it appearsthat in May, 1895, they were removed from a house called “ TheRetreat ” in Kollupitiya to a liouse in the Fort known as “ TheAustralia Hotel.” The plaintiff's pledgor, Campbell, had beenkeeping an hotel at “ The Retreat,” and after May he kept “ TheAustralia Hotel.” On the 5th August, 1895, Fernando, theappellant, and Campbell joined in executing a notarially attesteddocument called an indenture, which was duly registered. Thisdocument recites, that Campbell was keeping an hotel called “ TheAustralia Hotel ” in No. 27, Upper Chatham street; that up to the31st July, 1895, he was the sole proprietor of the business andassets on the premises; that in consideration of the sum ofRs. 200 paid to him by Fernando he transferred a half share inthe goodwill and custom of the business, and in consideration oftwo-thirds of Rs. 900 he transferred to Fernando a just half shareof the stock, assets, and property belonging to the business,according to the annexed inventory. He further agreed to admitFernando from the 1st August as a partner in the business)subject to the provisions in the indenture, and in consideration ofFernando uniting his half of the stock with Campbell’s undisposedof share Campbell agreed to take Fernando as his partner inequal shares. ' The partnership was to be dissolved by six months’notice on either side. According to the appellant, however,
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(his partnership was mutually dissolved on the 10th Septemberfollowing by an agreement between him and Campbell that heshould take over Campbell’s half share of the stock for a sum ofBs. 2,000- This was an oral contract, and the price was paid bythe end of that month. After the purchase Fernando allowed.Campbell and his wife to remain in the hotel, and made Campbellmanager of the hotel with a salary of Bs. 200 a month and freeboard and lodging. Campbell left the island about the 20thOctober, 1895, and has not returned. Up to that date the licensefor the hotel premises was in Campbell’s name. A. month afterCampbell’s departure the appellant was required to take out alicense, in his own name, and he did so. When Campbell left inOctober the rent for September was due to the landlord of thepremises, and Fernando has paid the rent for September and forthe subsequent months, so that since the departure of CampbellFernando has been acknowledged as the tenant of the premises.
I have no doubt that when this action was instituted Fernandowas in actual possession of “ The Australia Hotel ” and its effects,,including these chattels if identical. His claim to them as ownerby purchase is a bend fide one. But the question still remains,Has he such a property in the chattels as will defeat the plaintiff’sclaim to sequestration and sale under his contract of hypothec ?To determine this question, one must consider the law relatingto the purchase and sale of movable property. The contract ofpurchase and sale is completed as soon as the contracting partiesare agreed upon the thing to be sold and the price to be paid forthat thing. Emptio venditio, est contractus mutual prsestationiSde re pro certo pretio tradendd, and the substantial elements of thiscontract are consensus, merx, et pretium. (Van L. Cens. Fors. Bk.IV. chap. XIX. sc. I). The contract—I am speaking of the HomanDutch Law—need not be in writing. Of course, if the partiesstipulated for a writing, the contract of purchase and sale wouldnot be complete without one. Our local laws have, however,modified the Roman-Dutch Law relating to the sale of movables.The Ordinance No. 7 of 1840 (section 21) requires as an additionalelement to complete the contract either a writing, signed by theparty making it, or, if there is no writing, part payment of theprice or part delivery of the thing sold. A contract complyingwith that requirement becomes complete, but the nexus of-the contracting parties is not dissolved until both the articlehas been delivered and the price for it has been paid or satisfied.
It is true that the risk of the article is with the purchaser as soonas the contract is complete, but the article does not, become thepurchaser’s own till he has secured the vacua possessio of it by
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March 23 and
delivery end has paid the price, or, if the contract is in writing;has granted the payment of the prioe. It is clear that mfclftnn thebuyer has the vacua possessio of the article he has not the fulldominium over it (see Berwick’s Voei, p. 19 note, p. 39 note, p. 112,and notes pp. 136,174, and 179). Tradition is the effective way ofgiving vacua possessio, and that may be literal or symbolical andfictitious. It is literal if the thing is given into the hand of thepurchaser. It is symbolical or fictitious if the key of the room inwhioh the sold articles are kept is handed to the purchaser ; if thepurchaser puts his mark on things very heavy of draught; if thethings are pointed out to the purchaser in his sight (traditiolongae manus); or if the purchaser has the things in his custodyand control at the time of the completion of the contract by leave orauthority of the vendor. (Van L. Cens. For. II 7,1; IV. 19,1; VoetXLI. 1, 34 ; Berwick'8 Voet, p. 141 note.) There must, however,be a delivery which transfers the vacua possessio, if the purchaser isto acquire a better right to the thing than a pledgee of the samearticle under a registered contract in writing without possession*A contract of pledge creates a jus in re which a contract ofpurchase and sale does not. The Ordinance No. 8 of 1871 has addeda further requirement to a written contract, of sale of movables,and that is the requirement ol registration. That has been intro-duced in the interests of conjmerce to prevent false credit beinggiven to a person in ostensible possession of goods with which hehas parted by contract of pledge or sale. Unless tradition can befairly inferred from the stipulation in the “ indenture ” thatFernando shall unite his half share of the stock with Campbell’sundisposed of half share in order to be admitted as a partner inequal shares, I can find no evidence of tradition before Campbellwas brought into and became Fernando’s manager. After the saleof Campbell’s remaining half share and before the institution ofthis claim there can be no doubt in my mind that the appellantFernando was given possession of the entire stock. Why cannotthat possession be considered as implementing the written con-tract of sale in August and the verbal contract of sale in Septem-ber ? Fernando had fulfilled his part of the contracts by paymentof the stipulated price. Why should not the tradition .of thewhole stook by Campbell to Fernando be considered a fulfilmentof his obligations as a vendor in August and in September ? Ican see no objection on principle to the tradition of the whole;stook being regarded as an effective tradition of the successivecontracts in August and September. If this view of the case is rightand just, then I think the appellant is better entitled to judgmentthan the respondent, and I should support the appeal with costs.
RAMEN CHETTY v. CAMPBELL