Vellasamy Pulle v. Mohideen.
1933Present: Dalton A.C.J. and Koch A.J.
VELLASAMY PULLE v. MOHIDEEN255—D. C. Chilaw, 9,353.
Promissory note—Action by holder for value—Note discharged at time ofendorsement—Right of holder to maintain action.
Where a promissory note given as security for a debt was endorsedto a bona fide holder for value after the debt had been paid and dischargedby the maker,—
Held, that the note had ceased to be a negotiable instrument at thetime of its endorsement and that no action was maintainable on it.
^^PPEAL from a judgment of the District Judge of Chilaw.
H. V. Perera (with him D. W. Fernando), for plaintiff, appellant.
N. E. Weerasooria (with him H. E, Amerasinghe), for defendant,respondent.
DALTON A.C.J.—Vellasamy Pulie v. Mohideen.
November 3, 1933. Dalton A.C.J.—
The plaintiff sought to recover the sum of Rs. 624.02, being part ofthe principal due and interest on a promissory note of September 19,1924, for the sum of Rs. 600, made by the defendant in favour of W. K.Perera and endorsed on or about September 19, 1927, by the latter forvaluable consideration to the plaintiff who claims now to be the holderin due course.
The defendant pleaded in answer to the claim that the note was givenby him to plaintiff to secure an advance made to him by plaintiff underan agreement whereby the defendant was to purchase and supply toplaintiff coconuts; that he did so; that on August 16, 1926, accountswere looked into between them and the sum of Rs. 156.75 was found tobe due by him to plaintiff; and that thereafter during the same year1926, he paid the balance by the supply of 3,000 coconuts, the note beingthereby fully discharged.
Two issues were framed, as follows : —
Was the note sued on paid and settled in full ?
In any event is plaintiff entitled to judgment, and if so, to what
The facts as found by the trial Judge are not contested on the appeal.He finds that defendant’s version of the agreement on which the note wasmade and given, and of the subsequent transactions, is the correct onebut that plaintiff’s is a holder in due course for valuable considerationwithout notice of the settlement between Perera and defendant, Pererahaving cheated him when he endorsed the note over to him. Plaintiffpaid Perera the sum of Rs. 434.15, which sum Perera represented to himwas due to him from the maker of the note at the time. At the timeof the endorsement, however, nothing was due under the agreement topayee, but he appears nevertheless to have been allowed by defendantto retain the note. On the first issue it was held that the note was paidand settled in full in October, 1926. On the second issue, following thedecision in Jayawardena v. Rahaiman Lebbe1 by which he was bound,the trial Judge held the note ceased to be a note on payment by the maker,and therefore at the time of the endorsement of it to plaintiff, it hadceased to be a negotiable instrument. The plaintiff’s action was there-fore dismissed with costs.
The facts in Jayawardena v. Rahaiman Lebbe (supra) are not set out fullyin the reports and I have therefore obtained the record from the Court ofRequests, Gampola, to ascertain how the note in that case was paid orsatisfied. Loos A.J., before whom that appeal first came, submitted itfor the opinion of a fuller Bench on the following facts. The note wasmade by defendant in favour of one Phillips. Phillips was the superin-tendent of a Mr. R. S. Agar, who gave Phillips money to purchase certainland. Phillips employed defendant to buy the land, giving him the moneybut taking the note in question and three others from him as securityfor the due application of the money. The land was purchased, themoney being duly applied for that purpose by the defendant, and Agarreceived conveyances for the land. Phillips nevertheless subsequentlyendorsed the note sued on over to the plaintiff who took the note for
1 21 N. L. R. 178.
DALTON A.C.J.—Vellasamy Pulle v. Mohideen.
value in good faith and was held to be a holder in due course. Defendantpleaded the money had been applied by him for the purpose for whichhe received it, the note being security that it should be so applied, andthat he was no longer liable on it, the note being thereby discharged.On the facts it seems to me the case of Jayawardena v. Rahaiman Lebbe(supra) cannot be differentiated from the case before us, and the decisionis binding upon us.
Counsel for appellant has urged however the matter should now be recon-sidered as some doubt has been thrown upon the correctness of the decisionin Jayawardena v. Rahaiman Lebbe (supra). A St. V. Jayewardene J.in Muttu Carpen Chetty v. Samaratunge 1 doubted the correctness of thatdecision, but it was not necessary to consider it'for the purpose of thatcase. In giving expression to his doubts he refers to the case of Glasscockv. Balls£ and to certain remarks there of Lord Esher M.R.
If one examine the facts in Glasscock v. Balls (supra), it is clear they differfrom the facts in the case before us and from the facts in Jayawardena v.Rahaiman Lebbe (supra) in one important respect. In the English case thenote had not been paid or discharged, within the meaning of section 59 ofthe Bills of Exchange Act, 1882, by or on behalf of the drawee or acceptor.The facts were that the defendant gave a note (the note sued on) for £289to one W. to secure a debt. Subsequently he became indebted to W. ina larger sum. W. required further security and defendant executed amortgage in his favour to secure the total debt, a memorandum beingmade at the time that the mortgage was to be an extra security for theamount secured by the promissory note. W. afterwards transferred themortgage to one Hall, receiving from him the sum of £700 on the transfer.The note remained in W.’s hands after the transfer of the mortgage and heendorsed it to plaintiff as security for a debt of £200 due from him toplaintiff. The plaintiff took the note without knowledge of any of thesecircumstances. At the trial it was proved W. had paid the plaintiff£60 on account of his debt, and plaintiff obtained judgment for £140,the balance of the debt. On appeal this decision was affirmed.
Lord Esher .ri the course of his judgment states that the case is notwithin the rule applicable in such cases as Bartrum v. Caddy* for tworeasons. The first reason is that the note had not been paid. Themortgagee had received payment of the amount of his mortgage fromthe transferee, but that was not a payment or discharge of the noteunder section 59 of the Act. (See Chalmer’s Bills of Exchange, 9th ed.,pp. 233, 234). It is not a question of there being no payment by legaltender as was urged before us, but whether there was any satisfactionof the note by or on behalf of the maker which would operate as a discharge.Both Lord Esher and Lord Lindley point out that the payment of theamount secured by the mortgage to the payee on the note would entitlethe maker of the note to certain rights as against the payee, but thatwas not payment of the note and did not affect a bona fide indorsee forvalue.
It is quite sufficient for this first reason to state that Glasscock v. Balls(supra) cannot govern the case before us for decision. It was on this firstground that the learned Judges in Thamboo v. Philippu Pillai4 following the
* 26 N. L. R. '881.a 9 Ad. <6 El. 275.
3 24 Q. B. ©. 18.* 32 N. L. R. 36.
242DALTON A.CJ.—Vellasamy Pulle v. Mohideen.
decision in Glasscock v. Balls (supra) distinguished the case before themfrom Jayawardena v. Rahaiman Lebbe (supra). The full facts not appearin the report of Thamboo v. Philippu Pillai (supra), but it would appear thetrial Judge had found that the note which was taken as additional securityfor a loan already secured by a mortgage bond had been paid, and in appealit was accepted that the mortgage bond had been discharged before thenote was negotiated so that there is sufficient material to indicate thatin respect of the mortgage (bond) the facts in the two cases are not entirelysimilar, since the mortgage in Glasscock v. Balls (supra) was not paid anddischarged but only assigned.
The second reason given by Lord Esher refers to the question of re-issue of the note. He states that even if the note could be treated as paid,never having come back into the power or control of the maker, it cannotbe said to have been re-issued. On that ground also it does not come withinthe decision in Bartrum v. Caddy (supra). In this latter case Lord Denman
J. and Patterson J. decided the question before them on the basisthat the note having been paid, and returning to the hands of the maker,it could not be re-issued since that is prohibited by the provisions of theStatute.* There is, so far as I am aware, no such statutory provision inCeylon lior can counsel refer us to a similar provision in any localOrdinance. Williams and Coleridge JJ. appear, however, to have cometo a conclusion in the case on the question of payment only, holdingthat the note having been satisfied by the makers, an end is put to it andit is no longer a negotiable instrument.
It is in the earlier part of his judgment, before he states the reasons uponwhich the rule applicable in such cases as Bartrum v. Caddy (supra) doesnot apply, that Lord Esher states that there may be a defence to anaction by a bona fide indorsee for value where the note has been paidand has come back into the maker’s hands before it was indorsed to theplaintiff. That defence he states does not arise in respect of any meritsof the defendant but because a provision of the Stamp Act2 has not beencomplied with. If there is no such statutory provision in Ceylon, thatdefence is not available here. Further, if this means that there is nodefence to stich an action, where the note has been paid but has not comeback into the maker’s hands before it was indorsed to plaintiff, that.would, it is urged, be an additional reason to show that Jayawardenav. Rahaiman Lebbe (supra) was wrongly decided.
After consideration of the argument of counsel in support of thisrequest for a reconsideration of the question, I do not think this Courtunder the circumstances would be justified in allowing it on the factshere. The case of Glasscock v. Balls (supra) upon the facts on which it wasdecided, as I have pointed out, differs from the present case on the facts,and in the absence of any other equivalent authority the decision inJayawardena v. Rahaiman Lebbe (supra) is binding upon us.
The appeal must therefore be dismissed with costs.
Koch A.J.—I entirely agree.
55 Geo. III. c. 184. *. 19.
5IT/, c. 184.
VELLASAMY PULLE v. MOHIDEEN