COSTA et al. v. SILVA et al

119-NLR-NLR-V-19-COSTA-et-al.-v.-SILVA-et-al.pdf


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[Pbtvt Council.J
Present: Lord Buckmaster, Lord Dunedin, Lord Panmoor,and Sir Walter Phillimore, Bart.
COSTA et al. v. SILVA et al.
&. G. Colombo, 35,701.
Executor purchasing property of testator in the name of his son—Saleset aside.^.
Where an executor being anxious to buy the estate of his ■ testatorbought it for himself in the name of his son, the sale was set aside. .
IjpHDE facts are set out in the judgment.
February 19, 1917. Delivered by Loan Buckmasteb : —
Two questions are involved in this appeal: the one as to whetherthe .appellants are entitled to set aside a deed of conveyance,No. 5,118, dated June 14, 1902; and the other, which only arisesif the first be affirmatively answered, what form the order grantingsuch relief should assume. Neither question involves any intricate,considerations of law, nor are the material facts capable of seriousdispute.
The appellants are the five children of Philippa Moraes, ■ and aretogether entitled in possession to one-fourth share of certain realestate, which was. the subject of a general gift contained in thejoint will of one Simon Moraes and his wife, Jfistina Pereira. – Thisreal estate, in turn, consisted of certain fractional interests in fivedifferent properties acquired by Simon Moraes at various datesbetween 1874 and 1885. The joint will was dated July 7, 1894=;-by it the first and second respondents were appointed executors,and under its terms the appellants became entitled to half of ahalf of these fractional interests in reversion expectant on the deathof their mother, Philippa Moraes.
Simon Moraes died on December 23, 1897; his wife survived him,and died on July 28,' 1908; and Philippa Moraes died on February18, 1907.
It is uncontradicted upon the evidence that in 1902 the secondrespondent was anxious to buy the property in question for himself;there is no reason to impute to him improper or dishonest motivesfor this desire. He was associated with the family, and there mayhave been many good and fair reasons which prompted his wish.He* accordingly inquired of Mr. E. W. Pereira, a proctor of theSupreme Court, as to whether his proposal could be properlyaccepted, and was clearly told that it could not. The direct
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Cotta v.SOva
transfer to himself was therefore abandoned, but on June 14, 1902,the conveyance in dispute was executed, transferring the whole ofthe • interests in the real property in question to his son, the- thirdrespondent to this appeal, for the price of Ss. 6,500. No purchasemoney was provided by the son on this transaction, the wholeamount being raised by a mortgage of the purchased estate and ofcertain other property belonging to the second respondent, by whom'this mortgage was subsequently redeemed.
In 1909 the appellants commenced proceedings under the testa*mentaiy jurisdiction of the District Court of Colombo, and, as theyalleged that the sale in question had been made at an under-value,an issue was directe<T~ld ascertain the facts.
This issue was tried with witnesses, and on January 11, 1912, theDistrict Judge held that the allegation as to under-value had beenestablished, and that the executor was himself the real purchaserOf the estate. The third respondent, the son of the executor, was. no party to these proceedings, and, as the property stood in hisname, separate proceedings were necessary to set aside the deed.
The action out of which this appeal has arisen was accordinglybegun on January 27, 1913.
Between the date, of the judgment. of the District Judge and thecommencement of this suit, namely, on December 14, 1912, the .second and third respondents executed a mortgage of the propertyto the fourth and fifth respondents, who were consequently madedefendants; but as a caveat had been registered against the titleon November 23, 1912, their position does not differ from that oftheir mortgagors. The case was heard before the District Judge,who on December 10, 1914, gave judgment in favour of the plaintiffssetting aside the deed. On appeal to the Supreme Court thisjudgment was reversed, and from their judgment the present appeal„ has' been brought.'
In their Lordships’ opinion much of the confusion in this casehas been caused by the exaggerated importance attached in all the •Courts to the question of the true value of the property. The DistrictJudge decided, after hearing and seeing the witnesses, that theprice of Bs. 5,500* was' grossly inadequate. The learned ChiefJustice and Ennis J. in the Supreme Court disagreed with this con-clusion, and devoted nearly the whole of their judgments to theexamination of this point. The question of value might, no doubt,in the absence of other evidence, be of great weight in determiningthe true character of the impeached transaction, but in the presentcase there is other evidence of a most striking and convincing nature.The learned District Judge found the following facts: —
That the alleged purchaser, the third respondent, had no
money wherewith to buy the property.
That the repayment of the mortgage, by which the price was
found, was not made by him.
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(o) That tile deeds after redemption remained in t&e custody of iWT.tile executor.ir—*
That tiie executor cultivated the lands and took the crops. Boonti««a
That tiie third respondent never had anything to do with the Coatav.
lands…SUva
And, finally, that he told falsehoods, deliberate and designed,and was wholly unworthy of credence.
In addition to these findings, there must be mentioned the factthat the executor, whose action, was challenged, never ventured togive evidence. It is true that he was old and was said to be inill health, but he attended the Court throughout. the trial. Noapplication was made to take his evidence on commission, and nomedical evidence tendered to show he was incapable of givingtestimony. From these findings, and in these circumstances, theDistrict Judge concluded that the third respondent was nothing butthe nominee of his father, and this conclusion—which, whetherthe value be sufficient or inadequate, completely establishes theplaintiffs’ case—is dismissed in two sentences of the Supreme Court:the Chief Justice saying that the finding of the purchase money bythe executor and his own control of the property after the sale donot, in the circumstances, conclusively show that the third defendant-is merely his nominee; and Ennis J. adds:“ I am unable to see
any act of the second defendant that cannot be attributed to aparental regard for a son's welfare. ”
Their Lordships cannot think that the Supreme Court was rightin taking this view. Had the third respondent been a stranger tothe executor the case would not admit of argument, for it wouldthen be nothing but the case of -an executor yho, being anxious tobuy the estate of his testator, bought it for himstif in the name of anominee instead of his own—a device so transparent would notdeserve a moment's attention. How is the matter altered by thefact that the nominee is his son? Mr. Lawrence has urged thatthis introduces the principle that such a purchase is, in fact, a giftby way of advancement from the father to the son. But a giftof what? The property he could not give, because he could notbuy it; the purchase money he never attempted to give. Theordinary rule as to the presumption arising from a purchase of afather in his son’s name is only of general application in competi-tion between the father and the son and those claiming under them orin virtue * of their rights, and then it is only relevant where the pur-chase has, in fact, been made by the father and not by the son, andwhere, as in this case, the father could not purchase, the rule couldnot apply, unless and until the transaction had become validatedby the assent of all the beneficiaries.^-"
It is urged against the appellants that the estate has recentlyincreased in value, and that it is due to this fact that these pro-ceedings have been instituted. If this argument could have been
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carried to the point of establishing that the appellants with kn&w-ledge of their rights had waited until they knew that the estate hadimproved, and Had then asserted a claim which before they werenot prepared to make, it would be a serious answer to the appellants’case. This, indeed, would be part of the defence of laches, and itappears greatly to have influenced the judgment of Ennis J.; butfor this defence it is essential to prove knowledge on the part ofthe person who has lain By, and no such knowledge is shown inthe present case before the decree was made in the testamentaryproceedings. In all cases of avoidable transactions a party entitledeither, to affirm or to disaffirm the matter in dispute is sure to regulatehis action by the consideration of which course will m the end proveto be most profitable. If the property has fallen in value, no doubtthe appellants would have been content, and because it has risen,they seek to enjoy the gain. But it is precisely this right that isgiven to a person in their position, and it is this risk that is run byany person who enters into a transaction subject to such defect.
The appellants, therefore, are, in their Lordships' opinion, entitledto relief, and it becomes necessary to determine in what form, thatrelief shall be granted.
The decree of the District Court declared that the deed of June14, 1902, was null and void, and ordered that the property whichit affected should be declared to form part of the estate .of SimonMoraes and his wife, and as a consequential order directed that themortgage of "December • 14, 1912, was not entitled to registration.Counsel for the respondents have urged that in any event this orderis too wide; they assert that the present appellants are the onlybeneficiaries who have challenged the transaction; that the. othersmust be assumed to have knowledge of all material facts, and tohave elected to adopt instead of to repudiate the deed. In thesecircumstances, they contend that it is only necessary to declare thedeed void so far as it affects the interest of the appellants.
The argument appears to be fair, but it is impossible to give iteffect without interfering with the full rights of the appellants in,the administration of the estate. If the property in question wererequired to be sold for the payment of the debts, the appellantscontend that they were entitled to -have whatever benefit mightarise from the estate being sold as a whole, and that, although thiswhole was of itself but a series of fractional interests, yet it was.impossible to say that the same result would be reached by sellingone-fourth of those fractions as would be arrived at were the wholesold and one-fourth taken of the proceeds.
This contention is, in their Lordships’ opinion, well founded. Thesale of the property is one that cannot be supported, and mustconsequently be set aside. The result of this order willbe worked.'out in the testamentary proceedings that are still on foot. In those/proceedings the executors would be entitled to credit for the money
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that they have actually provided for payment of the debts, together1917.
with interest thereon at the current rate, from the day when thoseLoan
8oms were paid. They will also be entitled to credit for all sums Buckmastrbproperly spent in improvement to the property, with interest on Oostav.such sums at the same rate; while, on the other hand, they will SUvabe bound to account for the rents and profits. For the balancefound due to them on this account they will be entitled to sell thewhole of the estate, and they must then divide the balance of theproceeds among the beneficiaries according to their respective sharesand interests.
Accordingly, their Ijordships think that the decree of the DistrictCourt was perfectly right. This decree must be confirmed, and thejudgment of the Supreme Court set aside. The respondents mustpay the costs of the appeal to the Supreme Court and of this appeal;and their Lordships will humbly advise His Majesty accordingly.