051-NLR-NLR-V-71-DHAMMINDA-NAYAKE-THERO-Appellant-and-THE-CEYLON-THEATRES-LTD.-and-another-Re.pdf
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TAMBIAH, J.—Dhamminda Nayake Thero v. Ceylon Theatres Ltd.
1967Present: Tambiah, J., and Siva Supramanlam, J,DHAMMINDA NAYAKE THERO, Appellant, and THE CEYLONTHEATRES LTD. and another, Respondents
S. C. 353j64—D. C. Colombo, 781 JZ
Landlord and tenant—Landlord's tacit hypothec over tenant’s movable property—Execution of a prior conventional mortgage over the movables—Decree forarrears of rent—Sale of tenant's goods in execution—Claims to the proceedsof sale—Superior rights of the landlord—Mortgage Act (Cap. 89), as. 105,111 (1).
Where, in execution of a decree for arrears of rent due to him from a tenant, alandlord has seized and sold goods belonging to the tenant and the proceeds ofthe sale have already been realised, his rights to the proceeds of the sale aresuperior to the rights of a person who has a prior conventional mortgage over thegoods sold. In such a case, the general provisions of section 105 of theMortgage Act are subject to the special provisions of section 111 (1) of that Act.
A.PPEAL from a judgment of the District Court, Colombo.
Colvin R. de Silva, with Miss Maureen Seneviratne and P. Ilayperuma,for the substituted plaintiff-appellant.
W. D. Gunasekera, for the 1st respondent.
Cur. adv. vult.
December 18. 1067. Tambiah, J.—
This appeal involves the construction to be placed on sections 111 and105 of the Mortgage Act (Cap. 89). The plaintiff seized and sold certaingoods belonging to the second defendant respondent for payment ofarrears of rent due to him, in pursuance of a decree obtained from theDistrict Court of Colombo. The plaintiff is now dead and is represented
TAMBIAH, J.—Dhamminda Nay ok* Tharo v. Ceylon Theatres Ltd.231
by the substituted plaintiff appellant. The balance of the purchaseprioe left over was paid into Court on 15th August, 1963. On 26thAugust 1963 the first respondent moved to intervene in this case andprayed that the amount realised by the sale of the goods be paid to him,as his debt had priority over the appellant’s debt since he had a priorconventional mortgage over the movables which he had secured by a billof sale. The learned District J udge allowed the intervention and held thatthe respondent was entitled to claim priority over the appellant in respectof the proceeds of the sale. The substituted plaintiff appellant hasappealed from this order.
This appeal raises an important question regarding the priority to begiven to the landlord’s hypothec over other secured debts of movables.Section 105 of the Mortgage. Act (Cap. 89) is a general section enabling amortgagee of movables, which have been seized by any other creditor on adecree of Court, to intervene and claim priority over the proceeds of thesale. Section 111 (1) of the Mortgage Act is a special provision whichgives the landlord who has seized the goods of a particular description set-out in the Mortgage Act and who has realised the proceeds of the sale toclaim priority over the proceeds. It enacts as follows :—
“ Subject to the proviso to section 218 of the Civil Procedure Code,all goods belonging to a tenant and all household goods belonging to anymember of his family as hereinafter defined and for the time beingupon any premises shall be liable to be seized in execution of a decree inan action against the tenant for rent due in respect of the premises, andwhere such goods are so seized and sold, the payment of the amountof the decree shall be a first charge on the proceeds of the sale inpreference to any other charge or interest whatsoever other than acharge in favour of Her Majesty or of any local authority.”
A mortgage is defined in this Act to include any charge on property forsecuring money or monej's worth. The landlord’s hypothec is either acharge or an interest in property and the specific provisions of section111 (1) give the landlord priority over the proceeds of the sale of the goodsin preference to any other charge or interest whatsoever other than the chargein favour of Her Majesty or any local authority. Thus, it is clear that theonly charges that are exempted and over which the landlord cannotclaim priority are those in favour of Her Majesty or any local authority.By necessary implication all other charges and interests sue postponed to.that of the landlord’s hypothec. If it was the intention of the Legislatureto give priority to conventional mortgages, such mortgages could havebeen brought under the exceptions. But the omission to give priority tosuch mortgages clearly shows that if a landlord in exercisinghis hypothechas secured the goods and sold the same he has priority over the proceedsof the sale over the debt due even to a secured creditor. The learnedDistrict Judge has erred in constru ng section 111 (1) of the Mortgage Actand has held that the mortgage executed in favour of the respondent haspriority over the hypothec created by operat'on of law in favour of theappellant.
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TAMBIAH, J.—Dhamminda Nay aka Thero v. Ceylon Theatres Ltd.
The provisions contained in sections 110 to 113 of the Mortgage Actwere enacted to implement the recommendations of the Mortgage Commis-sion which reported that the Roman Dutch law pertaining to the tacithypothec of a landlord was in many respects unsatisfactory.
Even under the Roman Dutch law where the landlord, who has a tacithypothec over the invecta illata has perfected it by the seizure and sale,he has preference to the proceeds of the sale over all unprivileged claims,whether secured by hypothec or not. Mr. Gunasekera relied on a title inVoet (XX. 2. 5). Gane’s translation of this title is as follows :—
“ So much is this so that, if a rural tenant has made a covenant thatthings taken on and brought in shall be pledged, and before bringingthem on he has put something under obligation to another by way ofhypothec, and has only afterwards brought the thing into the farm, hewho accepted the pledge in special and unconditional form would be inthe stronger position. That is because it was in the debtor’s powerto decide whether and what goods he wished to bring on and to renderaffected with the obligation through so doing. Thus it was still truethat the right of pledge could not arise without his consent.”
Here Voet was dealing with a situation where the landlord has notsecured his hypothec by seizure and sale and brought the proceeds intoCourt. However, in another passage dealing with special privilegedhypothecs, he states (vide Voet XX. 4. 19.) :—
“ Those besides who have made advances for the repair of a houseas also under our customs for the repair of a ship have a hypothec withprivilege. This applies to the very houses and vessels which have beenrepaired, though not also to the remaining goods of the owner ; see. more at length what has been said in the title on Tacit Hypothecs. Inaddition owners of leased tenements have one over things brought inand carried on, when they have taken steps to have them attached. Andto put it shortly, the same applies to all those to whom it has beenremarked above that either by law or by custom they have a hypothecover individual things or a right of retention.”
Thus it is clear that a landlord who has secured his hypothec by sale ofthe invecta et Mata of the tenant has a special privilege to claim priorityover all other unprivileged debts, including the debt of a secured creditor.This view has been adopted in Ceylon {aide Wijewardene v. Noorbhai1.)Cayley J. said (vide 1874 Grenier Reports, Vol. 3 at p. 34):
“ A landlord has more than a lien over, or right to retain physicalpossession of the invecta et illata until his rent is paid ; he has a tacithypothec which when perfected by seizure becomes privileged and isentitled to preference over all unprivileged claims whether secured byhypothec or not.”
1 (1927) 28 N. L. R. 430.
Gvnapala v. Wtlson de Silva
233
Although the Mortgage Act has made sweeping changes regarding thelandlord’s tacit hypothec in Roman Dutch law, in all matters where specificprovisions have been made in the Mortgage Act, the Roman Dutch lawhas been wiped out. Section 111 (1) of the Mortgage Act has merelyreiterated the existing Roman Dutch law.
Section 105 is a general section giving the right to a secured creditor ofmovables to intervene in a case where a creditor has seized the goods ofthe debtor and to claim that the goods should be sold by public auctionand also claim priority over the proceeds of the sale. Section 111 (1)however is a special provision giving the landlord, who has effected hishypothec by seizure and sale, priority over all debts excepting all moneysdue to the Crown or to the local authority. Applying the canon ofconstruction which is expressed in the maxim generalia specialibm nonderogant, when a landlord has effected his hypothec by seizure and sale,one has to apply section 111 (1) of the Mortgage Act.
For these reasons, the learned District Judge’s order dated 28thFebruary 1964 giving preference to the first defendant respondent overthe proceeds of the sale is set aside. The substituted plaintiff appellant isentitled to draw the sum which has been brought into Court by the saleof the goods which were seized and sold.
The appellant is entitled to costs in both Courts.
Siva Supramaniam, J.—I agree.
Appeal allowed.