021-NLR-NLR-V-12-CRACKLAW-v.-CLEMENTS-et-al.pdf
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Present: The Hon. Sir Joseph T. Hutchinson, Chief Justice,and Mr. Justice Middleton.
CRACKLAW v. CLEMENTS et at.
D. C. Kandy, 18,898.
Appropriation of payments — Payment of interest—Appropriation—:
Mortgage debt—Unsecured debt.
A mortgage bond was dated July 15, 1904 ; on October 3,1904,and January 16, 1905, the mortgagor paid two sums of Rs. 90each for the interest then due on the bond; and on May 6, 1905,he made a payment of Rs. 96, which he wished to place againstthe interest, but which the mortgagee insisted on placing againstan unsecured debt due to him from the mortgagor. Afterwardsthe mortgagor made three other payments, the last of which was inApril, 1906. The mortgagee deposed that about October, 1907, themortgagor agreed to allow him to appropriate all the payments whichhe had made towards the amount due by him on the unsecured debt.
Held, that all the payments, before the arrangement of October,1907, should be credited to the more onerous <Jebt, viz., themortgage debt.
Held, that when part of a mortgage debt'due on a bond for adefinite and certain sum had been paid off, the parties could notafterwards agree that the payment should be cancelled, becausesuch an agreement would be in contravention of the Stamp Laws.
Held, further, that this principle should be applied as regardspayment of interest as well.
A
PPEAL by the second defendant from a judgment of theDistrict Judge of Kandy. The facts material to the report
sufficiently appear in the judgment of the Chief Justice.
Van Langenberg (with him Bawa), for the. second defendant,appellant.
J. de Saram. for the plaintiff, respondent.
Ch a(k>. milt.
1909.March 11.
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1909. March 11, 1909. Hutchinson O.J.—
March 11.
:This is an appeal by the second defendant. The action was
brought by the mortgagee on a mortgage bond: the first defendant.is a mortgagor and the second defendant is a purchaser of themortgaged property subsequent to the mortgage. The only questionnow is as to the amount due for interest on the mortgage; theplaintiff claims, and the District Court has awarded him, interestfrom the date of the bond, but the appellant says that certainpayments which were made by the mortgagor to the mortgageeought to be credited to him as on account of the interest on themortgage.
The bond is dated July 15,1904. It is for the penal sum of Rs. 7,200to secure the repayment of-Rs. 3,600 and interest, and is stampedas a bond to secure Rs. 3,600. On October 3,1904, and January 16,1905, the mortgagor paid two sums of Rs. 90 each for the interestthen due on the bond, and on May 6, 1905, he made a payment ofRs. 96, which he wished to place against the interest, but which theplaintiff insisted on placing against an unsecured debt due to himfrom the mortgagor. Afterwards the mortgagor made three otherpayments, the last of which was in April, 1906, and which he didnot appropriate, but which the mortgagee appropriated to theunsecured debt. These payments, which amount together toRs. 762, are those which the second defendant says should be creditedas against the interest on the bond. The second defendantbought the mortgaged property in November, 1907, at a Fiscal’ssale in execution against the mortgagor. The mortgagor admitted,and consented to judgment against him for the full amount of theplaintiff’s claim.
The plaintiff deposed that about September or October, 1907, themortgagor agreed to allow him to appropriate all the paymentswhich he had made towards the amount due by him on the promis-sory note (i.e., the unsecured debt), that he had threatened to putthe bond in suit unless the mortgagor so agreed, and that the latterdid so agree. The District Judge believed that the parties didmake that arrangement, and I see no reason to doubt it.
The appellant says; in the first plaoe,-that there was no proof ofthe existence of the unsecured debt, because the promissory noteswere not produced.' The plaintiff, however, was not suing on thenotes, and there was no reason why they should be produced, if theCourt was satisfied otherwise of the existence of the debt.
The appellant also contends that the arrangement made in1907 between the mortgagor and the mortgagee was illegal; thatwhen part of a mortgage debt due on a bond for a definite andcertain sum has been paid off, the parties cannot afterwards agreethat the payment shall be cancelled, or, which comes to the samething, that the mortgage shall stand as security for the balance of
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the original debt and also for a fresh advance of the same amount 1909.as that which was paid off, because such an agreement would be March 11 ■in contravention of the Stamp Laws. That objection is sound as Hutchinsonregards the principal debt, and I think that it is equally sound as C,J-regards the interest, and that the first two payments of Rs. 90 eaohmust be set against the interest on the bond. As to the otherpayments, the first one, Rs. 96, was made by the mortgagor to abank to the mortgagee’s credit; “ the plaintiff,” he says, ‘ ‘ wished meto place it to his account as against the interest due on the bond,but I refused to do so, and placed it to the credit of the moneysadvanced by me to him independently of the bond.” The nextpayment, Rs. 91, was also made to the mortgagee’s account at thebank; it does not appear how the last two, one Rs. 185 and theother Rs. 210, were made, or that the mortgagor made any appro-• priation of any of the three last payments at the time of payment.
The mortgagee says that he credited the mortgagor’s account onthe piomissory notes with them, but his books do not show that hedid so; the payments are all entered in his ledger on a page whichis headed with the number and date of the mortgage bond, but hesays that his intention was to credit the payments against themoney due on the notes. It does not appear that there was anyentry relating to the notes either in the ledger or in any other book.
So that, before the arrangement of September or October, 1907, allthese payments either were or ought to have been credited to themore onerous debt, and that was the debt on the bond. And themortgagee seems to have recognized this when he induced themortgagor in 1907 to agree that they should be credited to theunsecured debt.
The result is, in my opinion, that the decree of the District Courtshould be amended by reducing by Rs. 762 the amount for default,in payment of which the mortgaged premises are directed to besold. The decree so far as regards the first defendant will stand,but after the words “ in default of payment of the said amount,interest, and costs within such time,” there should be added thewords “less the sum of Rs. 762 (being the amount by which asbetween the plaintiff and the second defendant the interest due onthe mortgage ought to be reduced).”
The decree as to costs should stand. The plaintiff should pay theappellant’s costs of this appeal.
Middleton, J.—I concur.
Decree varied.
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