FERNANDO v. SILVA

001-NLR-NLR-V-07-FERNANDO-v.-SILVA.pdf


THE
NEW LAW REPORTS OF CEYLON.VOLUME VII.
FERNANDO v. SILVA.
R., Colombo, 15.590.
Promissory note payable on demand—Action by endorsee against maker—
Agreement between maker and payee as to suspending payment in the event
of a contingency—Knowledge of such agreement on the part of endorsee—
Evidence Ordinance, s 92— Conditional delivery.
Section 92 of the Evidence Ordinance, which deals with the exclusionof evidence of oral agreements, allows by proviso 3 that the existence ofany separate oral agreement constituting a condition precedent to theattaching of any obligation under any such contract, grant or dispositionof property, may be proved.
This principle applies to negotiable instruments also.
Oral evidence is admissible in the case of such instruments to shownot only that the consideration for the contract has failed, but also thatwhat purports to be a complete contract has never come into operativeexistence.
Where A made a promissory note in favour of B for a certain sum ofmoney payable on demand, on account of the price of a land which Bhad sold to A, on the agreement that, if B did not turn out C whowas in occupation of it, the amount of the .note was not to become payable.
Held, in an action raised against A by D, the endorsee of B, that as Dhad notice of this oral agreement it was open to the defendant to pleador prove such agreement in bar of plaintiff’s claim.
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HE * plaintiff sued the defendants Silva and Inis wife and oneCecilia de Silva for the reCpvery of a sum of Rs. 250 and
interest due to him as endorsee of a promissory note dated 29thDecember, 1898, made ’ by the defendants jointly and severallyin favour of one -Marsi'ano Fernando,* anl by him endorsed to theplaintiff on 13th May, 1900. The defendants admitted the making
1902.
September 22.and 24.
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°f the note, but pleaded that it was given on account of the priceSeptember 88 of a land sold to them by the payee, on the agreement that theand defendants should pay the amount of the note only in the event ofone Nonchihamy, who was then residing in a house on the land,being ejected by the payee. The defendant pleaded that theplaintiff had knowledge of this agreement with the payee, andthat Nonchihamy had not been ejected. The Commissioner, afterhearing evidence, believed the case for the defence and dismissedthe plaintiff’s action.
The plaintiff appealed. The case was argued on September 22,1902.
Bawa, for the appellant.—The plaintiff's title to the land wasgool. He passed his title to the defendants, handed them thetitle deeds, and put them in possession. Nonchihamy occupieda. part of the land. She has no title to it, but claims to be acaretaker . of it. The evidence shows that she was let in byMarsiano Fernando. The defendants took no steps to put her out.The plaintiff, having conveyed the land to the defendants, is notnow in a position to sue Nonchihamy in ejectment. The defend-ants must do so. But the agreement which the defendants havepleaded in their answer as to the right of the defendants to suspendthe payment of the note till Marsiano turns out Nonchihamycontradicts the terms of the promissory note that it was payableon demand. Oral evidence regarding the former agreement hasbeen improperly admitted. Evidence Ordinance, section 92. InAppuhamy v. Ran Menika (3 8.G.C. 61) it was held that the titleto immovable property was complete when the deed of transferwas executed and delivered, as that was vera traditio of the land.The plaintiff is entitled to judgment on the promissory note.
Van Langenberg (with him Samarawikrama), for the defend-ants, respondents.—The defendants were not bound to ejectNonchihamy. They had the power to sue her in ejectment, butthey were not bound in law to do so. ^ It is open to the respond-ents to say that, in consequence of the agreement between thedefendants and Marsiano Fernando as to the ejectment of Nonchi-hamy, the plaintiff who represents Marsiano _ Fernando did notbecome a holder*of the promissory note in due course. He took it‘ in* May, 1900, with knowledge of this agreement, kept quiet for along time, did not task for interest, and came into Court on8th March, 1901. Being a creature of the payee, his title to the billis bad, and his action against the maker is not maintainable.
Cur. adv. vult.
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24th September, 1902. Monciueff, J.—
On the 29th December, 1898, the defendants, who are husbandand wife, bought from one Marsiano Fernando a property calledHunukotuwewatta for Bs. 2,000. At the same time they mort-gaged the property for Bs. 1,000, and a promissory note wasexecuted by the wife in favour of Marsiano. The note was forBs. 250, it was payable on demand, but the interest at 9 per cent,was not to begin to run until the 29th January, 1899. It appearsthat of the purchase money the defendants paid Bs. 1,750, while thebalance of Bs. 250, the amount of the note, remained unpaid. Onthe 13th May, 1900, Marsiano endorsed the note to the plaintiff,and on the 8th March, 1901, the plaintiff put the note in suit-The defendant’s story is that the note was given subject to anagreement or condition which had reference to the fact that awoman named Nonchihamy, who had been the vendor’s caretaker,remained in possession of a house on the property. The defend-ants took delivery of the whole of the land with the exception ofNonchihamy’s house. There was obviously some agreement res-pecting this note. That is clear from the fact that Marsiano and theplaintiff, as endorsee, between them held the note for more thantwo years, and although it was payable on demand and no interestwas paid on it, it was not put in suit until the 8th March, 1901.There is some vagueness as to what the agreement was. The firstdefendant says that Marsiano was to eject Nonchihamy within onemonth from the date of the note, and is corroborated by the factthat interest was to be payable on the note from the 29thJanuary, 1899—a month after the making of the note. If that wasthe case of the defendants, there was a complete breach of theagreement at the end of January, 1899. I think, however, thatthat is not the case of the defendants. I understand them to meanthat the obligation they undertook on giving the note was subjectto a suspensive condition, i.e., that their obligation on the notewas suspended until the happening of a certain event, viz., theejectment of Nonchihamy. Nonchihamy has never been ejectedand the defendants say that their liability on the note has neverbecome .definitive. That is ?he case set up in the answer, and thecase suggested by the first isue.
It is argued, however, that, even If there waSj a parol {Agreementof thig kind, it cannot be used to vary or detract frbm the obligationon the note. It is said, and I agree, that there was no want Urcomplete failure of consideration, which the ‘law, as expressel inthe Evidence Ordinance,’ section 92, proviso 1, would permit thedefendants to pijove. ‘There may have been partial failure ofconsideration. The case, however, is .not tjiat there was a failurg
1902.
September 22and 24.
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1902.
September 22and 24.
HoNoiucxnr,
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of consideration, but that the obligation on the note was not toarise until Nonchihamy was ejected. The question then is, whetherthe law permits proof of that condition.
Section 92 of the Evidence Ordinance,- which deals with theexclusion of evidence of oral agreements, allows by proviso 3 that“ the existence of any separate oral agreement, consituting acondition precedent to the attaching of any obligation under anysuch contract, grant or disposition of property, may be proved.”That principle, so long as. its operation is not excluded by law inrelation to negotiable instruments, would, in my opinion, apply tothis case. The principle has been admitted in English Law withsome reluctance. Common Law Judges were apparently veryaverse to the admission of oral evidence with regard to obligationsincurred on negotiable instruments. But I find this in Mr.Chalmers’ book, Art. 55. He speaks of a note, delivered as this notewas delivered, as an “ escrow,” and then he says that the payee of thenote may be treated as a sort of bailee, and finally, by reference tocertain authorities, he lays down that oral evidence is admissibleto show, among other things, in reference to negotiable instru-ments, both that the consideration for the contract has failed, andthat what purports to be a complete contract has never come intooperative existence. That is the defendants’ case. In support ofthat proposition Mr. Chalmers cites some authorities, one of whichI have not been able to consult, Salmon v. Webb (3 H. L. 510)■In Bell v. Lord Ingestre (12 Q. B. 317) we find that the defend-ant’s acceptance of two bills! was obtained and transmitted to theCompany with his name endorsed upon it for the purpose ofretiring some overdue bills, but on the express condition that thelast-mentioned bills should be' returned to him by next postwhich condition had never been complied with. Lord Denman,Chief Justice, said the bills were a sort of escrow, and regarded thecase as something very novel, because the bills were delivered toparties who were to benefit by them. Still he thinks they weredelivered to them as mere trustees, and the other Judges took thesame view more or less. In the third ,case (Castrique v. Battigieg,JO Moore, P. C. 108) the Court apparently considered that theintention with which .delivery of the bill or note was made andaccepted,* as evinced by the words, either spoken or written, of theparties, and the circumstences under which the delivery tookplace, were all matters' which should be taken into considerationin determining the exact position brought about by the making ofthe note.
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These cases appear to me to apply in this instance, if it isheld that the agreement was entered into as alleged between.
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Marsiano and the defendants, and the plaintiff (the endorsee) hadfull knowledge of what had taken place. The defendants assertthat the plaintiff earned this transaction through, and that he wasin the employment of Marsiano. The Commissioner has heldthat he was privy to these proceedings, and is bound by what.Marsiano did. I think the Commissioner was right in his findingon the facts, and in holding that the agreement or condition setup by the defendants was made, and that the plaintiff is bound byit, inasmuch as the event upon the occurrence of which thedefendants’ liability was to become positive has never taken place.In my opinion the defendants are not liable upon this note.
1902.
September 22and 24. .
UOMCSEOT
J.