084-NLR-NLR-V-31-RAMANATHAN-v.-PERERA-et-al.pdf
( 304 )
1929.
Present: Fisher C.J. and Drieberg J.
RAMANATHAN v. PERERA ei al.
232—tD. C. Colombo, 29,990.
Mortgage—Sale of mortgaged property—PersonalactionagainstIke
debtor—Hypothecaryaction deferred—Ordinance No. 21 of 1027,
s. 16.
Where title to mortgaged property has' passed from the mort-gagor, it is open to the mortgagee to bring a personal actionagainst the mortgagor to recover the debt without at the sametime asking for a hypothecary decree against the transferee inpossession.
^^PPEAL from a judgment of the District Judge of Colombo.
The defendant mortgaged two lands, Dalupotha and Alothia,to secure- a loan of Rs. 40,000. The .land Alothia was subsequentlyreleased by the mortgagee, while shortly afterwards title to Dalu-potha passed, subject to the mortgage, to the added defendant.The plaintiff, to whom the mortgage bond had been assigned bythe original mortgagee, brought an action against the defendantto recover the principal an.d interest due on the bond. He askedfor a money decree only.
The defendant, in his answer, alleged that the added defendanthad purchased the land Dalupotha for, or in trust for, the plaintiff ;that the plaintiff and the added defendant were acting fraudulentlyand collusively in order to get rid of this mortgage on Dalupotha ;and that the plaintifE was not entitled to discuss other propertybelonging to the defendant before Dalupotha, which was theproperty specially hypothecated on the mortgage bond assignedto the plaintiff. The defendant prayed that the plaintiffs actionbe dismissed, or in the alternative that a hypothecary decree
( 805 )
(and not a money decree only) be entered in favour of the ' plaintiff, 1929declaring Daiupotha specially bound and executable under the Ramanathattsaid decree.*• ■P«fero
The learned District Judge held that the plaintiff was the realpurchaser of Daiupotha, and that Daiupotha having been soldsubject to the mortgage, the defendant’s debt to the plaintiff onthe bond was .extinguished. He dismissed the plaintiff’s actionwith costs. The plaintiff appealed.
de Zoysa, K.C. (with Nadarajah and Rajapakse), forplaintiff, appellant.—There is no evidence to support the findingthat the plaintiff was the real purchaser of Daiupotha. Thedebt on the bond assigned to the plaintiff by the original mortgageetherefore remains, and the defendant is personally liable on thebond though the mortgaged property has gone out of his hands.
There is nothing to prevent a person who sues on a mortgagebond from asking for a money decree only against the mortgagor.
The Mortgage Ordinance, No. 21 of 1927, section 16, expresslystates that a hypothecary action against the third party in possessionof the mortgaged property need not be combined with the personalaction against the debtor. This section brings our law into linewith the Roman-Dutch law (vide Voet XX. 4, 3). The plaintiffis entitled to a personal decree against the defendant. Daiupothaneed not be discussed by the plaintiff before he goes against thedefendant's property.
H. V. Perera, for defendant, respondent—There is ampleevidence that the plaintiff was interested in the purchase of Daiu-potha, and that the added defendant held it in trust for him. ■
Daiupotha was expressly bought subject to the mortgage • both thedefendant’s bond and the mortgage security are therefore extinguished.
(Voet XX. 6, 1). In any event,- a mortgagor is entitled to ask thatthe property which was specially hypothecated under the bondsued onshouldbe first discussed beforeany other propertyis
seized in execution against him. (Wijesekera v. Rawal *; Justinian'sCode S,28, 9;Van Zyl’s Judicial Practice 207).Section 16of
the Mortgage Ordinance does not alter the position in any way.
Even though a mortgagee can ask for a personal decree only againsthis debtor, thedebtor is entitled to askthat, insatisfactionof
the decree against him, any property specially mortgaged to hiscreditorshouldbe first discussed—even whenthat property
has passed into the hands of a third party.
De Zoysa, K. C., in reply.
Chosky (for added defendant, respondent) associated himselfwith the argument for the appellant.
1 20 N. L. H. 126.
( 306 )
1929 December 10, 1929. DniEBKitG J.—
The appellant holds an assignment ol a mortgage bond, P 1,v”p«wa n of July 8, 1926, on which the defendant borrowed a> sum of Rs. 40,000hypothecating two estates, Dalupotha and Alothia. Alothia wasreleased by a previous holder of P 1, and the title to Dalupotha,subject to the mortgage on P 1, has passed to the addeddefendant.
The appellant brought this action asking for a money decreeonly against the defendant for the principal and interest due onthe bond, Rs. 39,367.71. The defendant on September 23, 1926,sold Dalupotha to D, B. Perera, subject to the mortgage on P 1,for Rs. 20,000; on October 14, 1926, by D 4 D. B. Perera mortgagedDalupotha as a secondary mortgage, and other lands primarily,to the appellant to secure advances to be made on promissorynotes. The appellant put the bond D 4 in suit on January 30,1928, there being then about Rs. 100,000 due on it, and in executionof the decree Dalupotha was sold on February 29, 1928, and boughtby the added defendant. There is evidence that the amountdue on the primary mortgage, Rs. 40,000, was stated by the auction-eer. Dalupotha was bought by the added defendant for Rs. 17,000;it is said to be worth Rs. 60,000.
At this time the creditor on P 1 was Jayewardene, in whosefavour it was executed. Five days before the sale referred to,the defendant paid Jayewardene Rs. 3,000, gave him a promissorynote for Rs. 25,000, and obtained a release by deed of the mortgageon Alothia. The release was registered on February 25, andAlothia was thereafter mortgaged by the defendant for Rs. .10,000.The defendant says that at the sale he told the appellant of the ■release and suggests that the added defendant heard him say it. .
On March 29, 1928, Jayewardene assigned P 1 to Wijeratnam,who on June 3 following assigned it to the appellant.
This action was brought on September 25, 1928. In his answerthe defendant claimed that Ramanathan Chetty, who had boughtDalupotha, was a necessary party. Ramanathan Chetty was.joined as added defendant, and in his amended answer the de-fendant said that .the added defendant had purchased Dalupothaifor, or in trust for, the appellant and that the appellant and thesadded defendant were acting fraudulently and collusively forithe purpose of getting rid of the primary mortgage on Dalupotha„.that the appellant was not entitled to discuss other property ofthis before Dalupotha, and that it was ■ not open to the appellantsto ask for a money decree only. He prayed for a dismissal of theaction, or in the alternative that decree be entered against himfor the sum claimed and for a hypothecary decree declaringDalupotha bound and executable.
( 307 )
The learned District Judge in dismissing the action has goneon the ground that the appellant was the real purchaser of Dalu-potha. The evidence does not justify this finding. The defendantsays that he was told by his proctor that the appellant was tryingto put him into trouble by taking an assignment of the mortgagebond P 1 and then first selling Alothia, and it was for that reasonthat he got Alothia released. He says that before .this he hadmoney transactions with the appellant but that he ceased to dealwith the appellant and induced his friends not to do so, and thatthe appellant was angiy with him; that before the sale he toidthe appellant that he would not succeed in involving him in troubleand told him of his having secured the release of Alothia. .1.understand from this that the appellant wished to get an assign-ment of P 1 so as to have the satisfaction of being a creditor ofthe defendant and compelling payment by him and that the defend-ant sought to prevent this by reducing the security and therebymaking the assignment risky or . unattractive to the appellant.Defendant says that the appellant told him that he would not buyDalupotha himself but that a relative of his would do so; at thesale he heard the appellant suggesting to the added defendanthow much he should bid.
The appellant did not take the assignment of P 1 until fourmonths later.
I doubt whether the appellant had all this in mind when Dalu-potha was sold. There is nothing in his advising the addeddefendant at the sale, and he had an interest in the best pricebeing realized. There is no evidence of any connection betweenthe added defendant and the appellant and nothing to show thatthe added defendant did not pay for the estate with his own moneyor that he is not holding it for himself. Nor do I think it in theleast likely that a Chetty moneylender would involve himself.. in any risk merely out of a desire to worry a person for ceasingto borrow money from him. It appears to me that the appellanttook the assignment in the ordinary course of his business knowing,as it now appears in the case, that it was a good investment. Thedefendant can pay the amount due and he has other propertyon which the appellant has placed a caveat to prevent their dis-posal by him. The appellant has elected in this action to takepresently a money decree and execute it against the defendant,and-the only question is whether the law enables him to do so orwhether he is obliged to combine with it a hypothecary actionin which he null get a decree rendering Dalupotha liable for theamount decreed.
It must be taken that the title to Dalupotha is in the addeddefendant.
31/23 –
1989
Dbtkhkhc I'.
liniuuiHithuii/'. lJi rnw
( 308 ) .
1929
Drusberg J.
Ramanathanv. Perera
Section 16 of the Mortgage Ordinance, . No. 21 of 1927, relievesa mortgagee from the necessity of combining with the personalaction against the debtor the hypothecary action against theperson in possession of the mortgaged property, which was theresult of Chapter XX/VI. of the Civil Procedure Code (PunchiKira v- Sangu1). The creditor on a mortgage bond has now,therefore, the same privileges which he enjoyed before the introduc-tion of the Civil Procedure Code and he can elect with which ofthe actions he will first proceed.
The right is clearly stated by Voet:
Meanwhile, by our usages, a much greater change has beenmade in this matter, for when immovables are boundby special or legal mortgage and possessed by the debtorhimself, it is open to the creditor to institute simultane-ously the personal and the hypothecary actions, and toinclude both in one libel ; but when they are in thepossession of a stranger, the election (allowed by theancient law) has been restored to the creditor, of eithersuing the debtor in the first instance by the personalaction, or the third party in possession of the mortgagedproperty by the hypothecary action (Voet XX. 4, 3,Berwick's Translation).
In Ahamadu Lebbe Marikar v. Luis 2, which .was a case decidedbefore the Civil Procedure Code came into force, a mortgage creditorobtained a simple money judgment on his bond and seized inexecution the mortgaged property. On a claim being made tothe property by a third party the creditor's right to bring anotheraction for a hypothecary decree was recognized.
The bond on which thepresentactionwasbrought was executed
before OrdinanceNo. 21of 1927cameintoforce, but section 4
makes the provisions of section 16 apply to mortgages createdbefore the Ordinance. It is not denied by the defendant thatthe sum claimed is due on the bond P 1.
The appeal is allowed. The decree appealed from is set aside,and judgment will be entered for the appellant against the defendantas claimed, withcosts.The defendantwillpay the costs of the
added defendantin theDistrictCourtandthe costs of appeal
of the appellant and the added defendant.
Pisher C.J.—1 agree.
Appeal allowed.
1 11900) 4 N. L. R. 42.2 {1880) Z S. C. 0. 99.