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Present: Fisher C. J. and Drieberg J.
A. DE ZOYSA v. BANDIYA et al.
10Z-102a—D. C. Kurunegala, 11,673. .
Mortgage—Sale of mortgaged property—Extinction of mortgage—Sale of
mortgage bond in execution—^Right of purchaser in execution—
scope of action under section 247 of the. Civil Procedure Code.
Where a person mortgaged a land to B and subsequentlytransferred the land to B’s wife free from encumbrances and apart of the consideration for the transfer was the discharge ofthe mortgage debt by B,—
Held, that the mortgage bond was extinguished and that apurchaser in execution against B obtained no rights on the bond.
A purchaser in execution of the right, title, and'interest of themortgagee is on the same footing as the latter and takes the bondsubject to all equities.
Per DhiebeIbg J.—An action under section 247 of the CivilProcedure Code is a statutory one which cannot be extendedbeyond those limits.
Where the subject of execution is ia mortgage bond, the onlyquestion for decision in such an action is whether the right ofaction on the bond is liable to be sold in execution of the decree.Whether the bond was satisfied by payment or otherwise is aquestion that arises for decision only when an action to recoveron the bond is instituted by the purchaser.
TDLAiNTIFF instituted this action to recover a sum of money-*■ due on a mortgage bond executed by the first and seconddefendants on February 21,1917, in favour of one N. E. Wijeyesekere.On March 8,) 017, the first and second defendants had transferred theproper'^ mortgaged to the third defendant, wife of Wijeyesekere,free km all encumbrances. On the death of Wijeyesekere in 1918,the deceased was indebted to the plaintiff in a sum of Rs. 10,400,and the plaintiff sued the third defendant as executrix of thehusband’s estate.
He obtained judgment and seized in execution the mortgagebond in question. The third defendant successfully claimed thebond as her property and the plaintiff brought an action undersection 247 of the Civil Procedure Code and obtained judgment inhis favour declaring that the bond was liable to. be sold in executionof the judgment which the plaintiff had obtained against the estateofWijeyesekere. At the sale the plaintiff purchased the right, title,and interest of the deceased on the bond. On September 1, 1926,
t N. 9487 (t 1/46)
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1928. he instituted the' present action against the first and secondaa defendants as the persons who had executed the mortgage bond•! Bapdtya and the third defendant as the purchaser of the mortgaged property.i The learned District Judge dismissed the plaintiff’s action.
De Zoysa, K- C (with H. V. Perera and Ameresekere), for plaintiff,appellant.
Keuneman (with L. A. Rajapakse), for first and second defend-ants, respondents.
F. H. B. Koch, for third defendant, respondent.
E. 0. P. Jayatilleke (with Grooa da Brera), for fourth defendant,respondent.
November 30, 1928. Fisher C.J.— –
In this case, on February 21,1917, the first and second defendantsexecuted a mortgage bond in favour of N. E. Wijeyesekere to secureUs. 15,000 with interest at 15 per cent, or in default 20 percent.That bond was duly registered, and still remains registered anduncancelled, -and the main question we have to consider is whetherit survived and remained effective after the execution of the transferof the property mortgaged to the third defendant, the wife of N. E.
. Wijeyesekere. That transfer was executed by the first and seconddefendants on March 8, 1917. The transfer, the consideration forwhich was stated to be Rs. 24,000, was made “ free from encum-brances.” On November 7,1918, N. E. Wijeyesekere died, leavinga will of which he appointed the third defendant executrix, andprobate of the will was granted to her. At the time Of his deaththe deceased man was indebted to the plaintiff-in a sum of Rs. 10,400,and he sued the third defendant as executrix to recover the debt.He obtained judgment and seized the mortgage bond in execution.The third defendant successfully claimed the bond as her own proper-ty and the plaintiff brought an. action against her in her personal -capacity under section 247 of the Civil Procedure Code and obtainedjudgment in his favour that the bond was liable to be seized and soldin execution of the judgment which the plaintiff had obtainedagainst the deceased man’s estate. The sale took place and theright, title, and interest of the deceased man in the bond waspurchased by the plaintiff for Rs. 5,100, which sum he set off againsthis judgment debt. _
On September 1, 1926, the present action was brought by theplaintiff against the first and second defendants as the persons whohad executed the mortgage bond, against the third defendant to whomthe mortgaged premises had been transferred, and aginst the-fourthdefendant to whom the third defendant had mortgaged the premisesin 1917.
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The third defendant in her answer claimed that the first and second
defendants had by the deed of March 8. 1917, sold and transferred _
tiie land to her, and that at the execution of the deed the money due_ –
on the mortgage bond “ was expressly or impliedly paid by the -4. de Zoy amortgagors, the first and second defendants, and the said bond was v*thereby discharged ” and “ that the mortgage created over the saidland was extinguished.” She pleaded alternatively “ that with theconsent of the mortgagee (the said Nammunidewage EdwinWijeyesekere) the said lands were sold by the mortgagors andpurchased by the defendant, and that the mortgage existing on thesaid land was renounced and the mortgage thereby extinguished.”
The first and second defendants in their answer admitted theexecution of the transfer, but claimed that the third defendantheld the properties in trust for them, and further stated that only theprincipal sum of Rs. 15,000 was due on the bond, the mortgagedpremises having been possessed by the mortgagee in lieu of interest.
Three points were discussed before us, with which I will dealbefore coming to the main question to which 1 have referred above.
The first point was that the transfer to the third defendant was intrust for her husband. Assuming that it was proved that the .whole of the consideration was paid or provided for by the deceasedman there was no evidence whatever from which, in the words ofsection 84 of the Trusts Ordinance, 1917, “ it appears thp.t suchother person did not intend to pay or provide such considerationfor the benefit of the transferee . … ” It must be taken,
therefore, that the third defendant was the beneficial owner of theproperty.
The second point was that the conveyance to the third defendantwas as trustee for the first and second defendants. Of this there wasno evidence whatever, and neither is there anything from whichsuch an inference can be drawn. It is quite clear that they received. benefits equivalent to or exceeding in value the amount of theconsideration named in the bond.
The third point was put forward by the third defendant and it wasargued that the money for which the mortgage bond was given assecurity was given to , the third defendant for the purpose by herfather D. D. Pedris, and that therefore the bond was held in trustfor her by her deceased husband. This was the contention putforward by her in the action brought by the plaintiff against herunder section 247 of the Civil Procedure Code. It was definitelydecided against her by the judgment in that case and, in myopinion, she is precluded from again raising the point. There areother considerations which might have precluded her success on thatpoint, namely, the'absence of any evidence to comply with therequirement of section 84 of the Trusts Ordinance, 1917, referred to
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. de Zoyaa. Bcmdiya
above, and also as to the quality of the evidence called by her inthe District Court to support her contention, but I do not think it;s necessary to deal with those matters.
We now come to a consideration of the main question, namely,whether the mortgage bond was extinguished on the execution by thefirst and. second defendants of the transfer free from encumbrancesto the third defendant. The evidence shows very clearly that theidea of transferring the property was contemplated before theexecution of the mortgage bond. Moreover, the mortgage bondcontained a term most unusual or even unique in ordinary mortgagebonds, namely, the proviso that the mortgagors should not “ subjectthe said hereby mortgaged properties during the continuance ofthis mortgage to any lease or mortgage unless we shall have firstobtained the written consent of the said creditor ; that we shall notdo any act, nor make, nor execute any deed or document wherebythe income deriving from the said properties would become subjectto any assignment or assignments ; and that all leases, mortgages,or assignments executed without having first obtained such writtenconsent shall be wholly null and void.” This entirely accords withthe explanation given by Mr. F. de Saram that the mortgage bondwas kept alive in order that the transferee might be protected againstany adverse dealing with the property before the transfer couldbe registered. The evidence as to the relationship.of the plaintiff toN. £. Wijeyesekere and the circumstances attending the executionof the transfer and the. nature of the transaction was described bythe learned Judge as that of “ witnesses of unimpeachable credit.”-Beyond the comment that they are speaking of what happenedsome time ago, there is no reason whatever for discrediting their -evidence or for thinking that the lemed Judge rated the reliabilityof their evidence too highly. Their evidence is that the dischargeof the obligation on the mortgage bond was part of the considerationfor the transfer to the third defendant, and, moreover, it is clear that'the plaintiff knew this to be the case and testified to it on more thanone occasion after the death of N. E. Wijeyesekere.
It may be taken that N. E. Wijeyesekere provided the consider-ation for the transfer. He himself was a witness to the transfer. He -subsequently was a party to two mortgages of the property on thefooting that the mortgage bond has ceased to create an encumbranceon the property. It is clear that he himself could not have enforcedany liability on the bond against the first and second defendants,and on that basis the plaintiff could not succeed in this action. Bypurchasing the right, title, and interest of N. E. Wijeyesekere in themortgage action of which he became the purchaser he put himself onprecisely the same footing as N. E. Wijeyesekere. This propositi’onis supported by several Indian decisions feee Prayag Raj v. SOkn
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Prasad Tewari,1 M. M. Hussein and another v. K. M. Boy and others?1888.
also Moorgappa Cketty v. Holloway?) and is in accordance with
the law as laid down by Voet (Berwick's Translation, 1902 ed. gMHBB °-J-pp. 100-101—lib. XVIII., tit 4, section 13). “ As the purchaser of A.dsZoysathe debt enjoys the right and advantages already enumerated of the *' Band*yaparty who makes the cession, so on the other hand he is subject todisadvantages incident to his position; for any set off whioh mighthave'been opposed to the cedent’s claim before cession may also beavailed of against the cessionary, as shown in the title de compen-sationibus n. 4. et seq. (lib. XVI., tit. 1).
“ Nor is it infrequent, though not invariable, that the cessionary. may be defeated by the same pleas by whioh the party makingtie cession might have been repelled if he had sued.
“ It would be exceedingly hard that the position either of thedebtor or of other creditors should be made worse by a change of onecredit or for another.”
As regards the first and second defendants adopting the attitudethat they still owe the capital sum the learned Judge, afterexpressing the opinion that the estate is now.worth over Rs. 50,000says that “ It would be a great gain to them if they could get theestate back by discharging the bond in dispute.”
He, however, dismissed the action against them.
It would seem that the plaintiff might have obtained judgmentagainst them for the capital sum on their admissions in the pleadingsas they stand, but'in view of the fact that the decision in the actionturned substantially on the validity of the mortgage bond as againstthe third defendant, I think we may allow the judgment dismissingthe action to stand as it is. It is dear that they took up the position -that the capital sum secured by the mortgage was unpaid for ulteriormotives and not by way of an absolute admission of their indebted-ness. However reprehensible their conduct may be, I do not thinkthat we are bound to penalize them by giving judgment againstthem on the footing that so far as they are concerned the bond isvalid to the extent of the capital sum being still due.
The order of the learned Judge will therefore stand and theappeals will be dismissed
The plaintiff appellant in No. 102 will pay the costs of the thirdand fourth defendants, respondents of these appeals.
The matters in issue depend solely on what were the circumstancesunder which the mortgage bond 3 D 21 of February 21, 1917, infavour of N. E. Wijeyesekere and the transfer 3 D 20 of March 8,
1917, to the third defendant were executed.
i (1908) 35 Cal. 877.1 (1895) 22 Cal. 909, P. O.
» 2 S.C. C. 108.
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A. deZoyeav. BandUya
The plaintiff says that the transfer was. without considerationand made merely to put the lands pf the first and second defendantsout of the reach of their creditors, and that N. E. Wijeyesekere agreedto have the lands transferred to them where they paid him theRs. 15,000 which was to be given them on the mortgage bond.*There is nothing to support this beyond the statement of the first'defendant, and there is much which shows that that was not thearrangement. The first defendant says that he was introduced teN.'E. Wijeyesekere and that he could give no explanation why N. E.Wijeyesekere should have taken so much trouble over the settlementof his debts. It is not the case that N. E. Wijeyesekere was in aposition to invest money on mortgage, for on August 25, 1917, heborrowed Rs. 10,000 on a mortgage of his lands on P22 and when hedied the following year his estate proved insolvent. It is clear thatthe primary object of the transactions between the first and seconddefendants and N. E. Wijeyesekere was the purchase of same landsof the first and second defendants. Those lands were subject tomortgages, and there was the possibility of existing registeredseizures and of further, encumbrances of, both sorts accruingbetween the examination of the title and the perfecting of it by theColombo Notaries for the transfer. Mr. F. de Saram says that' themortgage was only a preliminary step to the transfer and to safe-guard their client against any. advances he might make prior tothe transfer and, I take it, to the registration of the transfer. Theextract of registrations ^3 D 17) was issued by the Registrar of Lands,Kurunegala, on February 22, 1917. It has not been proved whenMr. de Saram was given instructions for the transfer and when hebegan examining title, but 3 D 17 shows that in the case of someallotments the extracts were certified up to February 19 and inothers to February 20. His application therefore must have beenmade before February 19, and some appreciable time before, for theextracts form a fairly bulky record and must have taken some timeto prepare.
This case was presented to us as if the transfer 3 D 20 was merelya conveyance of the lands mortgaged by 3 D 21. .This was far frombeing the case. I have examined the deeds and I think my con-clusions are right. 3 D 21. was a mortgage of the southern half ofKankanimullewatte, 25 acres 2 roods and 28 perches in extent, andof a number of other allotments in that village including one,Dewatagahapitiyahena, which lies partly or wholly in Mirihetugoda.The extents of these allotments is given in Sinhalese sowing extents.For the transfer these lands were grouped together, surveyed, anddescribed in the conveyance as Kankanimullewatte, situated inIriyaeba and Mirihetugoda, and marked lot A, in extent 42 acres3 roods and 14 perches, in Mr. Weeraratne’s plan of February 27,1917. The lots comprising it appear in schedule 1 to the deed.
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By the' bond 3 D 21 six allotments of land, in the village l^eda- 1928..
gomuwa, numbered 4, 5, 6, 7, 8, and 9, were mortgaged. No lands
in Medagomuwa appearjn 3 D 20. By 3 D 21 two lots in the village
Halwella were mortgaged,. each described as Kadurukumbura, A.with its adjoining high land Kadurugahamullawatte. These twoallotments together with another, Pahalamullahena, not mentionedin the bond, in the same village, were grouped together to form oneblock marked D in Mr. Weeraxatne’s plan and described as Tengoda-watte of 9 acres 1 rood and 32 perches.
If the object of the conveyance was only to secure the first andsecond defendants against their creditors nothing was. easier thantohave taken a simple transfer of each allotment: But the surveyof the lands and the arrangement in the conveyance was such as isadopted when a Notary wishes to present a village title in a properform which will facilitate future transactions. All this must havecost'money, and the first defendant admits that all these costs,together with those of the mortgage and of the assignments, wereborne by Wijeyesekere. The total cost must have been considerable.
The mortgage 3 D 21 which is in Sinhalese was executed at Kuru-negala by a local Notary when Mr. de Saram was examining titlefor the transfer, and it was expressed to be subject to certainmortgages there stated ; on some blocks there were as many as threeprior mortgages. There is thus no substance in the contention thatall payments by Wijeyesekere must be regarded as made under themortgage and not in satisfaction of the price due on the conveyance.
The conveyance was declared to be free of encumbrance and theconsideration was properly applied to freeing the lands of them,Wijeyesekere arranged with Mr. Daniels, Proctor for the executioncreditors of the first and second defendants in D. C. Nos. 6,227 and5,890, topay Rs.2,000 onaccount of their claims and to pay the balancein six months; these were decrees on mortgages. Wijeyesekere gaveMr. Daniels two cheques for Rs. 1,000 each on February 20, 1917,the day before 3 D 21. It is significant that these were not honouredqntil March 9, the day after 3 D 20. The balance due on the twodecrees, Bs. 5,917*43 and Bs. 4,834*75, were paid by Mr. de Saramon August 29. On February 24, 1917, Wijeyesekere paid off themortgaged creditor in D. C. No. 6,383 and obtained an assignment,
3 D 16, of his decree for Bs. 5,000. By 3 D 12a of March 26, 1917,he took an assignment of two leases for Bs. 5,546 and on the sameday, by 3 D 12b, an assignment'of another lease for Bs. 270. Mr. deSaram speaks of the consideration for this deed as Bs. 600, and itwas so'stated at the argument, but this is an error. These pay-ments amount to Bs. 23,568* 18, which is Bs. 431 *82 less than whatwas due to the first and second defendants for the transfer 3 D 20.
Whether this balance was paid or not is not known. The truthocannot be had from the first and second defendants, but there is no
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'evidence that they ever claimed it, and it is a fair inference that it
was paid. On the same day a transfer, ID 2, was taken for Its. 1,000
Parowao J. fQr same jandg owned solely by Kiriya Veda, the second defendant.
4» Zousa The sum of Rs. 4,970 paid by Wijeyesekere for the assignment byV. Bandiya p m ofMarch 12> 1918> ofthe mortgage bond No. 16,342 of July 13,1915, of which mention was made at the argument, has no connectionwith this matter. This was not a mortgage by the first or seconddefendant and the bond appears unpaid and as an asset in theinventory of Wijeyesekere’s estate.
A great deal was made of the fact that Wijeyesekere took assign-ments of these mortgages and leases, 3 D 16, 3 D 12a, and 3 D 12b,and that he did not instead get. satisfaction of judgment enteredin the case of 3 D 16 and surrender of the leases by 3 D 12a and3 D 12b. I do. not think there is any force in this argument. ' If asI believe Wijeyesekere made this purchase as a provision for his wife,he sufficiently protected her by taking over these mortgage decreesand leases himself, it is not likely that he thought of enforcing theseagainst her. The Notaries might have adopted either method,and in fact in the case of the mortgage decrees in cases Nos. 6,627and 5,890 amounting to Rs. 12,752*12, no assignment was takenbut the creditors’ Proctor had satisfaction of judgment entered,3D8. If these sums went in payment of the consideration for thetransfer, as I am sure they did, there is nothing due and owing on thebond, and when Mr. de Saram found as he‘did, that there was nounexpected encumbrance accruing between his obtaining registra-tion extracts on 3 D 17 and the registrations of the transfer on March13, and there is no suggestion that any such encumbrances werecreated, he could have had the mortgage bond cancelled ; the factthat this was not done does not mean that the debt and hypotheca-tion exist.
If this view of the facts is correct the action must fail, for if there- is nothing due on the bond it is unnecessary to consider the exactnature of the third defendant’s title to the land and whose moneywent to the payment of the price which was paid by Wijeyesekere, adfound by us. It is hardly necessary to point out that it is notsought to make the land liable for a debt of Wijeyesekere as hisproperty, but to make it liable to whomsover it may belong, asproperty liable as security for an existing debt .of the first andsecond defendants.
But it was urged that if the evidence of the money being paid by
D. Pedris and Mrs. N. E.Wijeyesekere failed, the Court was obligedto hold that there was no consideration for the conveyance and thatthe case of the first and second defendants that the transfer was intrust for them should be accepted. It may be well therefore to deal%with the evidence on this point.
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We do not think that it has been proved that D. D. Pedris gave 1938.
the third defendant Bs. 15,000 for this purpose. He said that he
£ave this sum to her a few days before the mortgage and that the
only evidence of the payment was an entry in his ledger. His de Zoyaa-evidence was resumed on a later date when he produced his ledger, v‘
-which however contained no such entry.
Mrs. N. E. Wijeyesekere’s evidence that she gave the thirddefendant Bs. 7,500 is satisfactory; the counterfoils of her letters ofrequest for interest, 3 D 22, which were not referred toatthe argument,show that on May 12, 1917, July 14, 1917, October 6, 1917, andMarch 30, 1918, she wrote to the third defendant for payment ofinterest on Bs. 7,500. The last two counterfoils have a note onthem “ paid by cheque ” with the number of the cheque in eachcase. She said that these were the cheques of Wijeyesekere. Thecounterfoil of the letter of May 12,1917, shows a request for interestfrom February 22,1917, and this date is significant, for Wijeyesekeremade his first payment, Bs. 5,000, on this transaction two daysafter 3 D 16. I think therefore that the evidence of Mr. Wijeyesekerethat she gave the third defendant Bs. 7,500 for this purpose shouldbe accepted.
But even if the money which Wijeyesekere paid was not providedby the third defendant, that does not lead to the conclusion claimed, by the plaintiff that there was consideration for the transfer andthat the transfer must be regarded as in trust for the first and seconddefendants. The money in that case was Wijeyesekere’s and theconveyance was. either to her in trust for himself or it was for Jierown benefit. If it was the former, the plaintiff’s case must fail;the transfer to him extinguished the mortgage even if the debtsubsisted, for a man cannot have a hypothec over his own propertyTand the only right which passed to the plaintiff on his purchase ofthe bond would be the mere right of recovering, the debt.
But there is no reason for supposing that this was anything morethan a provision by Wijeyesekere for his wife, and I believe that tins'was the case. A gift by husband to wife is allowed (section 13 ofOrdinance No. 15 of 1876), and the third defendant got a good title-subject only to the claims of those who were her husband’s creditors.at the time of the gift.
As I have pointed out, however, these questions do not arise if-the Bs. 23,568* 18 paid by Wijeyesekere was on account of the con-sideration for the transfer. All the evidence in the case points to this%id I believe the evidence of the Messrs, de Saram and the forth-defendant as to the part taken by the plaintiff and that the plaintiffwas well aware of the real nature of the transaction, namely, thatthe third defendant became owner of the land and'that there wasnothing due on the bond. An endeavour was made to show thatthe third defendant was estopped by the judgment in D. C. Colombo,
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1028.. No. 16,210 from advancing her present claim. She there claimed thatfvnn«Tnn,fi j. the bond was held in trust for her, also that it had been discharged,
^ —— and that it had been discharged by the transfer. The Judge there-Itontoya heldonty question for decision was whether the bond, or
rather the right of action on the bond, was liable to be sold under •the plaintiff’s decree. He was right, for the action was a statutoryone and could not be extended beyond those limits. Whether thobond was satisfied by payment or otherwise, or if not satisfiedwhether it still remained secured by the mortgage, were questionswhich could only arise for decision when an action to recover on th&bond was made by the purchaser of it.
I agree with the order made by my Lord the Chief Justice.
DE ZOYSA v. BANDIYA et al