Kadappa Chettiar v. Ramanayake.
Present: Abrahams C.J. and Dalton S.P.J.KADAPPA CHETTIAR v. RAMANAYAKE et al.
289—D. C. Colombo, 49,485.
Mortgage action—Action on mortgage bond against mortgagor—Failure to joinsecondary mortgagee and transferee—Subsequent action against them—Ordinance No. 21 of 1927, s. 16.
Where a mortgagee, in an action against the mortgagor on the mort-gage bond, failed to make a secondary mortgagee and a subsequenttransferee of the property parties thereto, he is not debarred frombringing another action to have the property bound and executableas against them.
HIS was an action brought against the three defendants on a
T mortgage bond No. 1,101 for Rs. 40,000 executed by first defendantin favour of the plaintiff. On February 24, 1931, the first defendantexecuted a secondary mortgage in favour of the second defendant and onMarch 10, 1931, executed a conveyance of the property to his wife, thethird defendant. Plaintiff, who was unaware of the secondary mortgageand the conveyance, instituted action No. 46,335 in the District Court ofColombo on the bond against the first defendant. Judgment was enteredin favour of the plaintiff and mortgage decree entered in the usual terms.Plaintiff took no further steps on the decree. He then instituted thepresent action making the mortgagor, the secondary mortgagee, and thetransferee defendants to realize the mortgage and to have the propertybound and executable against the second and third defendants.
The learned District Judge held that as the second and third defend-ants, who were necessary parties to the previous action under theprovision of Ordinance No. 21 of 1927, were not made parties to thataction, plaintiff could not maintain a second action against them.
H. V. Perera (with him F. A. Tisseverasinghe), for plaintiff, appellant.The object of the Mortgage Ordinance of 1927 was to re-introduce theRoman-Dutch law of mortgage. Section 16 gives the mortgagee theright to bring a separate action in respect of each of his remedies. Underthe Roman-Dutch law the mortgagee was not limited to one hypothecaryaction Sinnaya Chittyar v. Babanis1 and Arumogam v. Velupillav),The restriction was made by section 34 of the Civil Procedure Code whichprovided that a plaintiff should sue for all his remedies in one action.That section has been repealed by section 16 of the Mortgage Ordinance.Even under the Code there was a conflict of judicial opinion as towhether a second hypothecary action could be brought8. The matterwas settled by a Full Bench (Supramaniam Chetty v. Weerasekere *),which held that only one action could be brought. That decision hasbeen subsequently disapproved of in Moraes v. Nallan Chetty °. The newMortgage Ordinance gave effect to the suggestion of Bertram C.J. inthis case. See also Suppiah v. Sinniahe and Ramanathan v. Perera7.
1 (1882) Wendt 213.* 20 N. L. B. 170.
•8 S.C. C. 97.s 24 N. L. R. 297 at 302.
3 16 N. L. R. 463.• 25 N. L. R. 383.
2J. N. B 32999 (1/54).
» 31 N. L. R. 304.
34DALTON S.P.J.—Kadappa Chettiar v. Ramanaydke.
The first action in this case was only in form a hypothecary action. Itwas not so in fact because the mortgagor had parted with his title.Second and third defendants were no parties to that action. No pleaof res judicata is available to them. Necessary party in section 6 of themortgage does not mean an essential party. The first action wasmaintainable without them.
E. B. Wikramanayake (with him M. T. de S. Amarasekera), for secondand third defendants, respondents. It is true that a necessary party insection 6 is not an essential party. But he is a party necessary if theplaintiff wants a decree that binds him. If he is not made a party nofurther remedy is available against him. A mortgagee cannot bringmore than one hypothecary action. The object of the MortgageOrdinance is to achieve finality (Subasinghe v. Palaniappapillail).Under the Common law a puisne encumbrancer need not be made a partyat all. He had a right only to whatever was left after the primary mort-gagee’s debt was satisfied. But the Code imposed certain conditions onthe primary mortgagee if he wanted a decree binding on subsequentencumbrancers—see sections 643 and 644 of the Civil Procedure Code.Under those sections it has been held by a Full Court that where a neces-sary party was not made a party to the action no subsequent action couldbe brought against him. (Supramaniam Chetty v. Weerasekere(supra). ) Section 6 of the Mortgage Ordinance has re-enacted thosesections of the Code with slight modifications. The Full Bench decision istherefore applicable. Section 16 of the Mortgage Ordinance does not givea mortgagee the right to bring more than one hypothecary action. It onlyremoves the disability imposed on him by section 34 of not being able tobring separate actions in respect of his separate remedies. For hisremedies one must look to the Common law. Arumogam v. Vellupillai”is no authority for appellants’ proposition. The only question decidedthere was a question of misjoinder.
H. V. Perera, in reply.—Moraes v. Nallan Chetty (supra) disapprovesof the reasoning in the Full Bench case. The earlier decisions are basednot on sections 643 and 644 of the Code but on section 640. That sectionhas been expressly repealed. That decision will not therefore apply.Nothing is enacted corresponding to section 640. It may be concededthat sections 643 and 644 are re-enacted in section 6 of the MortgageOrdinance. Those sections were not the basis of the decisions relied on.
Cur. adv. vult.
August 3, 1936. Dalton S.P.J.—
This is an appeal by the plaintiff against a judgment of the lowerCourt of July 18, 1934, dismissing his action against the three defendantson a mortgage bond.
On November 4, 1929, the first defendant executed a bond No. 1,101for Rs. 40,000 in favour of the plaintiff. Subsequently on February 24,1931, the first defendant executed a secondary mortgage over the samepremises by bond No. 2,542 in favour of the second defendant. Piethen, on March 10, 1931, executed a conveyance of the mortgaged pro-perty to his wife, the third defendant.
» 35 N. L. R. 289 at 291.
* 8S.C. C. 97
DALTON S.P.J.—Kadappa Chettiar v. Ramanayake.
In ignorance of the secondary mortgage and subsequent conveyanceabove mentioned, the plaintiff on October 2, 1931, instituted actionNo. 46,335 in the District Court, Colombo, on bond No. 1,101. In thataction the mortgagor, the present first defendant, was the only defendant.Judgment was obtained by the plaintiff on a warrant of attorney toconfess judgment, and the usual mortgage decree was entered in termsof the plaint on October 8, 1931. The plaintiff took no further steps onthat decree, as he appears shortly thereafter to have heard of the exist-ence of the secondary mortgage and the conveyance. He then on July 7,1932, instituted the present action No. 49,485, making the mortgagor,the secondary mortgagee, and the wife of the first named as transfereeof the mortgaged property, parties to the action, claiming, however, noremedy against the first defendant, against whom he already had a decreein action No. 46,335. He brought this second action, as he sets out in hisplaint, for the realization of the mortgage debt and to have the propertymortgaged declared bound and executable as against the second andthird defendants.
At the trial certain issues were framed, but only the first two weredealt with by the trial Judge, as he stated they appeared to go to theroot of the case. They were as follows : —
Can the plaintiff maintain this action against the defendants,as the second and third defendants who were necessary parties to
C. No. 46,335 have not been joined in that action and decree hasbeen entered in that action without the second and third defendantshaving been joined ?
The plaintiff having obtained a decree against the first defendantin D. C. 46,335, is the first defendant liable to be made a party in thisaction ?
The first issue has been answered against the plaintiff. The trialJudge is of opinion, as regards the second issue, that the first defendantwas a necessary party to the action on the assumption that the actionwas properly maintainable against the second and third defendants, butinasmuch as this action is not maintainable against these two latterdefendants, it follows that it must fail against the first defendant also.
The judgment of the lower Court has proceeded upon the basis thatinasmuch as the second and third defendants were necessary parties toaction No. 46,335, under the provisions of Ordinance No. 21 of 1927, sincethey were not made parties to that action, the plaintiff has exhausted hisrights and cannot now maintain this second action against them.
There seems to have been some misunderstanding as to the meaning ofthe term “ necessary party ” as used in the Mortgage Ordinance, No. 21of 1927. This term appears to have been adopted by the draughtsmanfrom one of the earlier judgments of this Court which was cited to us.Having regard to the different provisions of that Ordinance, the termdoes not mean necessary or essential for the proper constitution of theaction, but necessary if the plaintiff mortgagee desires to obtain a decreebinding upon any particular person in that particular action. This wouldseem to be clear from the provisions of section 10 of the Ordinance. Thequestion to be decided here is whether the mortgagee has thereafter a
DALTON S.P.J.—Kadappa Chettiar v. Ramanayake.
right of action against persons who were “necessary” parties in theearlier action, who were not made parties to that action or are not boundby the earlier decree.
Prior to the enactment of Ordinance No. 21 of 1927, before the repealof certain sections of Chapter XL.VI of the Civil Procedure Code, thisCourt had held that Chapter XLVI provided for one action only torealize moneys due or secured upon mortgage, within which the mortgageemust embrace all claims against all persons concerned. It has beenheld that it superseded the Common law remedies open to mortgageesprior to the Civil Procedure Code of 1889. This conclusion, as pointedout by Bertram C.J. in Moraes v. Nallan Chetty ’ is the result of section640 of the Code. It is urged by Mr. Perera on behalf of the appellantthat the effect of Ordinance No. 21 of 1927 is to restore the position,so far as remedies are concerned, which obtained under the Roman-Dutch law prior to the enactment of the Code.
Ordinance No. 21 of 1927 repealed sections 640-644, amongst othersections, of the Civil Procedure Code. Mr. Wikramanayake urged,however, that section 6 of the Ordinance in effect re-enacted the repealedsections 643 and 644, subject to slight changes with regard to registrationand giving of notice. Even, however, if that is taken to be so, as Mr.Perera has pointed out, section 640 is repealed and that is the sectionaccording to Bertram C.J., upon which all the determining decisionssince the enactment of the Code have been given. It was not suggested,as I followed the argument, that section 640 of the Code has been re-enacted in the Ordinance, nor do I think any such suggestion can bemaintained.
An examination of some of the decisions prior to the Ordinance of1927, however, would show that section 34 of the Code is the sectionwhich has been regarded as prohibiting more than one action to realizemoneys due upon a mortgage bond. The effect of those decisions and ofthe application of section 34 of the Code is now repealed by section 16of the Ordinance. Mr. Wikramanayake in the course of his argumenthad considerable difficulty, I think, with section 16. At one point heargued that the section merely gave a mortgagee a right to bring anaction on a personal claim for a money decree, and a separate hypothe-cary action. He conceded, however, that section 16 (2) had no meaningif that sub-section applied only to actions for a money decree.
It seems to me that, although there are difficulties in construing someof the provisions of the new Ordinance, the effect of it is to restore theposition in respect of remedies to what it was before the Civil ProcedureCode was enacted. This seems to be the conclusion to which Fisher C.J.and Drieberg J. came in Ramanathan v. Perera*. The learned trialJudge has referred to that decision in the course of his judgment, but hehas, in my opinion, put a very much narrower interpretation upon itthan the decision will properly bear.
The conclusion to which I have come on the material before us is thatthe plaintiff was, in the present state of the law, entitled to maintainthis action, and the first issue should therefore have been answered inthe affirmative.
1 24 N. L. R. atp. 301.
» 31 X. L. R. 304.
Zainabu Natchia v. Usuf Mohamadu.37
With regard to the position prior to the Civil Procedure Code, a casecited in the course of the argument, Mohideen Saibo v. Walters is noton the facts exactly on all fours with the case before us, but it is authorityfor the proposition that prior to the Code where the mortgaged propertyhas subsequent to the mortgage passed into the ownership of another,the mortgagee is not restricted to only one action against the mortgagorand the purchaser. He may, however, under the provisions of section16 (2) of the Mortgage Ordinance, now be refused costs in any actionexcept the first action.
The second issue whether or not the plaintiff was right in making thefirst defendant a party to this action has been answered in the affirmativeand there was no appeal against that conclusion. Inasmuch, however,as the answer to the first issue was in the negative, the action againstthe first defendant was also dismissed. The result of the appeal must betherefore that the decree of the lower Court dismissing the action againstthe three defendants must be set aside, and the case will go back to thelower Court for the further issues now to be tried.
The appeal is allowed with costs here and with the costs of July 11,1934, in the lower Court. Other costs of proceedings in the lower Courtwill be dealt with by the trial Judge when he deals with the furtherissues in the action.
Abrahams C.J.—I agree.
KADAPPA CHETTIAR v. RAMANAYAKE et al