Sockalingam Chettiar v. Munasinghe.
1939Present : Soertsz A.C.J. and de Kretser J.
SOCKALINGAM CHETTIAR v. MUNASINGHE et al.
285—D. C. Chilaw, 11,192.
Prescription—Mortgage bond—Payment of interest in advance—Date of pay-ment—Interruption of prescription—Ordinance No. 22 of 1871, s. 6.
Plaintiff lent the defendants money on a mortgage bond dated Novem-ber 14, 1927, which required them to pay interest once in four monthsin advance. The first four months’ interest was accordingly deductedwhen the bond was executed. No other interest was paid. Plaintiffbrought the present action to recover the money due on the bond onMarch 11, 1938. The defendant pleaded prescription.
Held, that the action was prescribed under section 6 of the PrescriptionOrdinance, No. 22 of 1871.
The payment of interest in advance cannot be regarded as a paymentmade on the date the interest because due for the purpose of interruptingprescription.
SOERXSZ A.C.J.—Sockalingam Chettiar v. Munasinghe.
^^PPEAL from a judgment of the District Judge of Chilaw.
V. Perera, K.C. (with him H. W. Thambiah), for plaintiff, appellant.
N. E. Weerasooria K.C. (with him A. E. R. Corea) for defendants,respondents.
Cur. adv. vult.
March 31, 1939. Soertsz A.C.J.—
The plaintiff in this case sues on a mortgage bond dated November 14,1927. He instituted this action on March 11, 1938, that is more thanten years after the date of the bond, but he relies on what occurred onthe day on which the bond was executed to save it from the statute foflimitations.
Admittedly, on that date the mortgagee retained a sum of Rs. 105out of the amount he was lending “ by way of interest for the first fourmonths
The plaintiff contends that by virtue of that arrangement, a sum ofmoney sufficient to make good the interest due for four months wasdeposited with the mortgagee, so that he might apply it as interest felldue, and that, in that way, Maifch 13, 1938, must be regarded as thelast date of interest on which there was a payment due on the bond.
The plaintiff bases this contention on the proposition that interestis an amount paid by the borrower to the lender as consideration for hisbeing allowed to have the use of the latter’s money and that, therefore, noobligation arises for the borrower to pay interest till he has had use of themoney, and that it cannot be said that there was a “ payment ” of theinterest due for March, 1938, in November 1937. In short his contention,as I understand it, is that the word “ pay ” in its proper legal conno-tation in a case like this, means the giving of money to discharge anexisting obligation, and, in this case he says that there was no obligationin November, 1937, to “ pay ” interest for March. In this view of thematter all that happened on the execution of the bond was that theborrower left a sum of money with the lender which became a “ payment ”as it came to be appropriated from day to day, or perhaps, from momentto moment as the interest fell due. In that way the last “payment”took place with the last appropriation at the end of March 13, 1938.
The case for the defendant is that on the execution of this bond fourmonths’ interest fell due, and was paid, and that that was the date of thelast payment of interest on the bond.
The question that arises for decision is which of these interpretationsis the correct interpretation of section 6 of Ordinance No. 22 of 1871which governs the matter.
The relevent words of that section are “ No action shall be maintain-able for the recovery of any money due upon any hypothecation or
mortgageunless the same be commenced …. within
ten years from the date of such instrument …. or of last
payment of interest thereon’1.
In ordinary speech, we speak of interest being paid in advance, and donot feel that we are misapplying the word “ pay ” or that we are extend-ing it beyond its strictly proper limits. But it is said that in a legal
SOERTSZ A.C.J.—Sockalingam Chettiar v. Munasinghe.
context such as this, the word “ pay ” can only be used to describe 'thegiving of money in order to discharge an existing obligation, a debtalready accrued. As a general rule that seems sound. I find in Nathan’sCommon Law of South Africa, Vol. II at p. 655 the following statement:“so far as the time of payment is concerned, it is clear that there canbe no payment of anything before it is due, since so long as no debt isin existence, there can be no payment. Thus if the debt has becomeannulled because there has been no compliance with the condition uponwhich it was undertaken, payment thereof cannot take place. Notonly can the debtor not be compelled to pay, nor the creditor to receivepayment before the condition is fulfilled, but if the debtor was unawareof the condition and paid the debt in error he may recover the same by thecondictio indebiti But he goes on to add “ a payment which is invalid 'through non-fulfilment of the condition precedent may become validatedby subsequent fulfilment of the condition, such fulfilment having a re-trospective effect extending to the time the agreement was made. Butwhere a period of time and not the fulfilment of a condition precedenthas been agreed upon for payment, and the debtor pays before suchperiod has elapsed, the payment will be valid”.
The case we are dealing with is a clearer case of a valid payment havingtaken place on the date of the bond, for that is the very date the partiesagreed upon as the date on which the first payment of interest shouldbe made.
Mr. Perera’s argument seems to me to beg the question when he basesit on the premise that there was no interest due at the time the bond wasexecuted or in other words, no existing obligation to pay it.
In my view, by virtue of the special argeement between the partiesfour months’ interest fell due at the moment the bond was executed andthe mortgagee paid over the money to the mortgagor.
The bond provides that the principal shall be payable on demand“ and until such repayment to pay interest on the said sum …. at
and after the rate of 18 per centto be computed from the
date hereof and payable once in four months in advance …. andthe first of such payment of interest to be made on this day of executionof these presents, provided however that if the payment of interest be
regularly made in the manner aforesaid the said mortgagee
shall be bound to accept interest …. at the rate of 14 per cent.
…. ” Here there are two separate covenants: one to pay the
principal on demand ; the other to pay interest in advance. By payingin advance the mortgagor obtains a four per cent, reduction of interest.
It is clear that the mortgagor agreed to pay interest in advance. Ifhe failed to do so on the 1st day of every four-month period a cause of.action would at once have accrued to the mortgagee to sue, on the cove-nant, for the recovery of the interest. There was, therefore, a presentdebt, an existing obligation. If, however, after interest had been paidfor four months the mortgagee recovered the principal as he was entitledto do on the strength of the “ on demand ” clause before the four-month period had elapsed, the mortgagor gets back the overpaid interest,not on the principle of the condictio indebiti but on that of the condictiocausa data, causa non secuta.
DE KRETSER J.—Socka Ungam Chettiar v. Munasinghe.
For these reasons, I reach the conclusion that the last date on whichthere was payment of interest on this bond was November 14, 1927.
I do not think I shall be justified in paraphrasing the date of the lastpayment of interest, into “the last date in respect of which interest hasbeen paid
The appeal fails. I dismiss it with costs.de Kretser J.—
The only question raised on this appeal is one of law and it arises fromthe following facts :—Plaintiff lent the defendants on November 14, 1927.Rs. 2,250 on a mortgage bond which required him to pay interest once infour months, in advance. The first four months’ interest was accordinglydeducted when the bond was executed. No other interest was paid.Plaintiff brought this action on March 11, 1938, and the defendantspleaded section 6 of Ordinance No. 22 of 1871 in bar of his action. Theplea was upheld in the trial Court. The question is whether this decisionwas right.
To begin with it is necessary to say at once that payment of interestis regarded as implying not merely an acknowledgment of an existingdebt, but a promise to pay it, and therefore prescription runs from thedate of the implied new promise. In other words, payment of interestis on much the same footing as a part payment of the principal and isin fact, on a higher footing since a part payment need not necessarilyinvolve a promise to pay any balance, whereas a payment of interestclearly acknowledges the existence of the debt out of which the obligationto pay interest arises.
That this is the principle is clear from the English cases and text booksdealing with the subject, the text books dealing with the Indian lawon the same subject and our own decisions, of which Kathirvelu Chettyv. Ramaswamy Chetty1 resembles the present case most closely.
Next, it is important to note that payment is put on the same footingas a written acknowlegdment, because there is not merely a verbal promise,but an act which establishes the new promise. It is something done afterthe first promise and dates the period of prescription from the date of thatsomething which is done. It must also be remembered that because everyman is supposed to know the law the Legislature uses language in ordinarymatters which the average man can understand. Maxwell (On theinterpretation of Statutes) at page 81 says, “ In dealing with mattersrelating to the general public, statutes are presumed to use words in theirpopular sense ; uti loquitur vulgus In this connection see also Beedlev. Bowley ’.
Section 6 of the Prescription Ordinance is enacted in connection with anumber of daily occurrences, viz., the loan of money and the payment ofinterest.
Would any ordinary person be so subtle-minded as Counsel for theappellant and think that the money handed over in November was notpaid that day, but was paid as each month’s interest became due, or thefour months’ interest became due, and would he think that there was animplied condition that the plaintiff should pay himself on the defendant’s» 4 0. A. C. 26.* IS S. C. 401.
DE KRETSER J.—Socklingam Chettiar v. Munasinghe.
behalf, that such a payment would be by the defendant himself and, whatis more, that the date of payment should be the last day of each periodfixed, and that there would be an implied promise made on that date topay the loan? Would he think that something done to-day is in realitysomething done tomorrow?
I very seriously doubt that he would ; and when one realizes that interestaccrues from day to day, the position would be that a payment would bemade every day and a promise implied every day, and so plaintiff wouldhave about one hundred and twenty promises to rely on, and would choosethe latest as suiting his purpose best. The whole position is too artificialto be accepted unless one must do so.
Let us examine the argument that the word “ payment ” in section 6has only one meaning, viz., “ the discharge of an obligation ” and thereforethere can be no payment in advance, but what really happens is that asum of money is deposited with the creditor who is authorized to applyit as the interest falls due. Suppose this is correct, does there follow afurther reference that he did so apply the money, that is, that he kept hispromise and that he kept it on some particular date, also a matter ofinference ?
Now “interest” is really the compensation which the lender receivesfor his not being able to use his money, his id quod interest in fact. There-fore there can be no interest at the time the money is lent. Therefore apayment on that day is not only not a payment, but not a payment ofinterest. And this view seems to have been adopted in a case reported inSanjiva Row’s book on the similar provision in the Indian Act.Unfortunately a report of that case is not available locally. That casetook the further logical step of saying that therefore there was no paymentof interest as contemplated by the Statute.
But this does not help the appellant and therefore Mr. Perera invited usto hold that the creditor did as a matter of fact apply the money in hishand as the interest fell due.
Now, we have not here even evidence that he did as a matter of fact soapply the money from time to time. In the Indian Courts it seems tohave been held that an entry in his books was not enough to take theaction out of the Statute.
The provision comes to us from the English law and Halsbury says,(vol. 19, p. 67, Article 110—old edition) “ the payment must, however, besuch that from it a promise to pay can be inferred in fact and not merelyimplied in law ”. Mr. Perera’s argument therefore of an implied paymentand an implied promise cannot be upheld. And this interpretation is notonly a practical one applied to a practical matter, but is full of common-sense of which all law is deemed to be the embodiment.
But is the word “ payment ” wrongly used when it is applied to ispayment of interest in advance ? To the average person it is not. It isso used by the creditor himself in the bond. The word does have ameaning other than the discharge of an obligation, and in fact the moneywas deducted in this instance on the result of a contract the terms ofwhich were approved of by the creditor if they were not actually insistedon by him. In fact it was not a payment by the debtor implying apromise but a deduction made by the creditor for his own benefit, in which
DE KRETSER J.—Socklingam Chettiar v. Munastnghe.
deduction the debtor acquiesced and perhaps had no option but toacquiesce. The debtor’s act was on that date and there is nothing in factto justify the artificial position that he was making a promise from timeto time. It was much the same as if the creditor had in his hands somemoney belonging to the debtor which he applied when and how he chose.Nathan, in his work (Vol. II., p. 655) says, “ So far as the time of paymentis concerned, it is clear that there can be no payment of anything beforeit is due ; since, so long as no debt is in existence, there can be no payment.Thus, if the debt has become annulled, because there has been no com-pliance with the condition upon which it was undertaken, paymentthereof cannot take place …. But a payment which is invalidthrough non-fulfilment of the condition precedent may become validatedby subsequent fulfilment of the condition, such fulfilment having arestrospective effect extending to the time when the agreement was made.But where a period of time, and not the fulfilment of a condition precedent,has been agreed upon for payment, and the debtor pays before suchperiod has elapsed, the payment will be valid …. Where aparticular date for payment is expressly stipulated, and is in the contem-plation of the parties …., payment must take place on the due
date. Thus, where it was stipulated in a lease that the rent should bepaid in advance on January 1st of each year, and if not paid on the dueday the lease should be cancelled, it was held that a tender of rent on-January 3rd …. was not a compliance with the terms of the lease”.
This quotation shows that the word “ payment ” can be and is usedfor something paid in advance in terms of an agreement and that itreceives legal sanction, and that the time of payment is the date agreedupon. It also shows that what is not a legal payment may become onelater, but the date is still the earlier date.
The error in Mr. Perera’s argument is that he assumes that • paymentcan have only one significance and that he confuses appropriation withpayment, such a payment as is an act of the debtor and makes himresponsible for an implied promise to pay. The appropriation, if made,may be in order, but it is still the act of the creditor, whether made on theauthority of the law or on an agreement with the debtor.
The true position is that the defendant was under a legal obligation topay and he paid as agreed. He was then under no obligation to pay tillthe four months had elapsed, and meanwhile it was the plaintiff who wasunder a legal obligation to apply the payment and when he did, hedischarged his obligation and not any obligation of the defendant.
Using the rules of construction already referred to the payment ofinterest was made on November 14, 1937, and the action is prescribed.Alternatively, there was no payment of interest and then too the actionis prescribed. There is nothing in Mr. Perera’s hypothetical case whichprevents such a conclusion being deduced. He asked whether if a manpaid twelve years interest in advance, the action would be prescribed inten years. In the first place such a thing is scarcely likely to happen andit is impossible to legislate for freakish situations, nor to reason from theunusual. Taking things as they exist in Ceylon, a payment of twelveyears interest would at least be a return of the loan on the very day it was
DE KRETSER J.—SocMingam Chettiar v. Munasinghe.
taken, and the creditor would have no greater grounds or cause of com-plaint than if the loan had never been taken. He would have the full useof his money and would not be entitled to interest and the money paid asinterest would in reality be a return of the loan. Assuming that the rateof interest were very low, then a great part of the loan would be returnedand such an unusual proceeding on the part of the borrower would, andought to put the lender on his guard against some possible trick in thetransaction. If he were so negligent as to go on with it, then he has onlyhimself to blame if he is outwitted by an all too intelligent and unscru-pulous borrower. But his position would be on the same footing as a manwho neglects to enforce his bond in time and the hardship of his casecannot alter the law and make the payment at once a series of payments,and the debtor’s single act a series of acts. There is nothing to preventhim from suing on the bond at any time and if he waits for over ten years,he has merely thrown away his many opportunities and been outwitted.
The appeal is dismissed with costs.
SOCKALINGAM CHETTIAR v. MUNASINGHE et al