HEARNE J.—Kandiah and Sivakanupillai.
1943Present: Heame and Wijeyewardene JJ.
KANDIAH et al., Appellants, and SIVAKANUPILLAI et al.,
224—D. C. Jaffna, 16J79.
Mortgage—Sale of property subject to payment of mortgage debt—Discharge ofmortgage by vendee—Seizure in execution of property—Claim by ven-dee—Right to payment of mortgage debt.
On January 1, 1940, third defendant conveyed the property in questionto the plaintiff, subject to a mortgage which the plaintiff undertookto discharge and to pay the third defendant a certain sum of money inaddition. On July 29, 1940, first and second .defendants issued writagainst the property and seized it. On August 5, 1940, the plaintiffc discharged the mortgage debt. On seizure of the property plaintiffclaimed it, but his claim was disallowed and the present 247 actionfollowed.
Held, that the property was liable to be sold under the writ issuedby the first and second defendants subject to a right of mortgage infavour of the plaintiff to the extent of the mortgage debt.
^ PPEAL from a judgment of the District Judge of Jaffna.
N. Nadarajah, K.C. (with him H. W. Thambiah), for first and seconddefendants, appellants.
S. J. V. Chelvanayagam (with him P. Navaratnarajah), for plaintiff,respondent.
N. Kumarasingham for third defendant, respondent.
Cur. adv. vuU.
August 4, 1943. Hearne J.—
The facts relevant to this appeal are these. On August 22, 1937, thethird defendant, a woman, mortgaged on P 2 two properties, Iniyavudaiand another called for short S, to one Kanthappillai. On January 1,1940, she conveyed both the properties by P 1 to the plaintiff “ subject tomortgage No. 5,321” (P 2). The plaintiff undertook to discharge themortgage debt of Rs. 1,260 and to pay the third defendant Rs. 240.On July 29, 1940, the first and second defendants issued writ againstIniyavudai which was seized. On August 5, 1940, the plaintiff, accordingto his evidence, discharged mortgage bond No. 5,321.
On the seizure of Iniyavudai by the first and second defendants theplaintiff claimed it by virtue of P 1 but his claim was disallowed and thepresent 247 action which was filed in November, 1940, Was the result.
The trial Judge held that P 2 was a genuine transaction and that theplaintiff had paid the mortgage debt on bond 5,321. But he also heldthat P 1 was collusive and fraudulent and, in the result, made the orderthat the land described in the plaint, viz., Iniyavudai, was liable to beseized and sold under the writ issued by first and second defendantsagainst the third defendant subject, however, to “a right of mortgagein favour of the plaintiff to the extent of Rs. 1,260 over the propertiesIniyavudai and S Described in P 1 ”. The first and second defendantshave appealed.
HEARNE J.—Kandiah and Sivakanupillal.
Counsel for the plaintiff, the respondent to this appeal, did not arguethat the order of the learned Judge which reserved to his client “ a rightof mortgage over Iniyavudai and S ” was justified by the provisions ofsection 11 of the Mortgage Ordinance under which he purported to act.He argued that as the Judge had found there was consideration for P 1,which he did, he could not have found that it Was fraudulent and collusive.This argument was disposed of by Garvin J. in Meera Saibo v. AyanSinnavan1. P 1 was clearly fraudulent and collusive. It was designedtp save the third defendant’s properties from creditors and the transferrendered her insolvent.
What remains to be considered is this. If the order of reservation in *favour of the plaintiff cannot be justified by section 11 of the MortgageOrdinance which applies to sales in hypothecary actions and not toprivate sales can it be justified at all ?
In Haniffa v. Silva2 A’s property was purchased by the plaintiff at aFiscal’s sale held under a writ issued against A. Subsequently A wasadjudicated bankrupt and thereafter sold the same premises to thedefendant. The purchase money" paid by the defendant was appliedin discharge of a mortgage decree against A with respect to the sameland. It was held that the defendant was entitled to a jus retentionistill the purchase amount was paid to him.
These facts are not, of course, precisely "similar. In particular it is to benoted that the plaintiff in Haniffa v. Silva (supra) was not permitted“to get the benefit of a payment which the defendant had made in thehonest belief that the property was his ” : while, in the present case, thewhole transaction (P 1) was tainted with fraud ab initio. The plaintiffdid not, as 'he had undertaken to do, discharge the mortgage (P 2) atonce. He did so only after the seizure by the first and second defendants.No doubt he regarded it as a step that was necessary in order to makethe fraud unassailable. Was the Judge justified in these circumstances,in giving the plaintiff the relief he did ?
With reluctance I have come to the conclusion that he was, though not,as 1 have indicated, for the reasons he gave. Civil Courts' interfere incases of fraud from a civil and not a criminal point of view. It is nottheir function to punish the wrong doer. Their function is to avoid thefraud and thereafter, as far as it is possible to do so, to place the wrongdoer and the person or persons he has wronged or attempted to wrong instatu quo. Even where a party to a contract alleges and proves, e.g.,misrepresentation, the Cpurt, after making all just allowances aims atrestoring the.parties, precisely to the state in which they were beforethey entered into the contract. It is sometimes a difficult matter whenthe rights of innocent third parties intervene.
In this case no such complication arises. If the attempt to defraud thethird defendant’s creditors had never been made, if P 1 had never beenexecuted, the first- and second defendants could only have seized and soldIniyavudai subject to the rights of Kanthappillai. As the plaintiff haspaid off Kanthappillai he must be regarded as standing in his shoes andthis is the effect of the Judge’s order.
1 (1927) 29 N. L. R. 84.
» (1912) 15 N. L. R. 362.
JAYETILEKE J.—Sinniah and Trincomalee Police.
If the first and second defendants were permitted to sell the land(Iniyavudai) free of any encumbrance, they would be enriched at theexpense of the plaintiff, and a civil Court would in effect be inflicting apenalty on the latter.
The appeal is dismissed. While the appellants have failed to disturbthe order of the trial Judge the respondent, in the face of authority and ofwell established facts, has right up to this Court persisted in maintaining aclaim to the full benefit of a fraud to which he was a party and whichhe probably inspired. Such ill-advised pertinacity must be discouraged.I therefore make no order of costs of appeal.
Wijeyewardene J.—I agree.,