099-NLR-NLR-V-69-M.-R.-DON-PEIRIS-Appellant-and-M.-P.-C.-MARASINGHE-Respondent.pdf
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Don Peiria v. Maraainghe
1967 Present: T. S. Fernando, Siva Supramaniam andSamerawickrame, JJ.M. R. DON PEIRIS, Appellant, and M. P. C. MARASINGHE,Respondent
S. C. 10165—D. G. Kurunegala, 1598jL.
Trusts Ordinance (Cap. 87)—Section 93—“ Notice ”—“ Property ”—Relevant date of“ existing contract ”—Partition action—Agreement, pending the action, totransfer future interests in the corpus—Effect—Specific performance.
Section 93 of the Trusts Ordinance reads as follows :—
“ 93. Whero a person acquires property with notice that anothor personhas entered into an existing contract affecting that property, of which specificperformance could be enforced, the former must hold the property for thebenefit of the latter to the extent necessary to give effect to the contract:
Provided that in the case of a contract affecting immovable property, auchcontract shall have been duly registered before Buch acquisition. ”
T. S. FERNANDO, J.—Don Peirit v. Maraeinghe
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Held, (i) that due registration of an agreement to sell land is of itself notice,within the meaning of the Section, to a person who acquires the land subsequentto such agreement.
(ii) that tho expression “ property ” in the Section includes rights on ausufructuary mortgage of immovable property.
During the pendency of a partition action, A and B, two of the co-owners,agreed on 20th September 1956 to sell to C the shares that would bo allotted tothem under the final decree. The agreement was duly registered. Subse-quently, before final decree was entored, A and B mortgaged their interests inthe corpus to D in the form of two usufructuary mortgage bonds, the mort-gagors expressly undertaking thereby “ to allow the mortgagee, his attorney,heirs executors administrators or assigns to possess the premises in lieu ofinterest ”. After final decree in the partition action was entered, the shareswhich were allotted to A and B wee transferred by them to C in accordancewith the agreement of 20th September 1956. In the present action C suod Dclaiming declaration of title to those shares and D’s ejoctment therefrom.
Held, that C was entitled to the protection of section 93 of the TrustsOrdinance. In determining whether there was an existing contract of whichspecific performance could be enforced the relevant date or dates were therespective dates of the execution of the two mortgage bonds.
A.PPEAL from a judgment of the District Court, Kurunegala.
H. IF. Jayeioardene, Q.C., with D. S. Wijemardene and Q. S. Marapone.for the plaintiff-appellant.
W. D. Qunasekera, with IF. 8. Weerasooria, for the defendant-respondent.
Cur. adv. vult.
February 11, 1967. T. S. Fernando, J.—
This appeal came before us for hearing following upon a disagreementbetween the two judges before whom it was first listed. It raisesquestions relating to the interpretation of section 93 of the TrustsOrdinance (Cap. 87), and the facts relevant to the determination ofthese questions are as set out hereunder.
Four persons, Adelaide Stainwall, Agnes Landers, John Pavey andLetitia Pietersz who were parties to partition action No. 10627, asevidenced by notarial agreement PI of 20th September 1956, agreed tosell to the plaintiff and the plaintiff agreed to purchase within threemonths of the entering of final decree in the said action all their interestsin the land the subject matter of that action. PI was duly registered,
H 5144 (7/67)
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T. S. FERNANDO, J.—Don Peiris v. Marasinghe
and no question arises here in regard to correctness or priority of regis-tration. Final decree was entered on 5th March 1963, and the firstthree of the vendors named in agreement PI were declared entitled tothe divided lots 2, 3 and 4 respectively in partition plan No. 1765.Letitia Pietersz was not allotted any interests under that decree.These lots were thereafter conveyed to the plaintiff by the three vendorsconcerned by transfer deed P4 of 6th April 1963, i.e., within the timespecified in agreement PI. The vendors declared in P4 that the threelots were free from all encumbrances whatsoever.
After the date of the agreement PI and before either final decree wasentered or transfer P4 was executed one of the three vendors, AdelaideStainwall, named in P4 mortgaged to the defendant her interests in theland in respect of which the partition action was pending,receiving from the defendant a sum of Rs. 500 and executingtherefor mortgage bond D1 of 20th April 1901. Another ofthe aforesaid vendors, John Pavey, also similarly mortgaged to thedefendant his interests in the same land. Pavey received from thedefendant a sum of Rs. 1,000 and executed in the latter’s favour mortgagebond D2 of 6th July 1961. Both D1 and D2 were usufructuary mort-gage bonds, the mortgagors expressly undertaking thereby “ to allow themortgagee, his attorney, heirs executors administrators or assigns topossess the premises in lieu of interest.” D1 and D2 were also dulyregistered, but, of course, subsequent to the registration of PI.
After the signing of transfer P4, the plaintiff appears to have beenplaced in possession of the said lots 2, 3 and 4 by the Fiscal acting inexecution of a writ of possession issued in the partition action for thepurpose of placing in possession the three vendors named in P4. Inregard to this event, the learned district judge has stated that theplaintiff had no right to be placed in possession in that way by ejectingthe defendant who had been there by virtue of the usufructuary bondsD1 and D2 in his favour. The ejectment of the defendant in that waywas improper and the tactics adopted by the plaintiff were undoubtedlyquestionable. However, the defendant regained possession of lots 2 and4 on 16th August 1963, and the plaintiff would have it that he did soforcibly. The present action came to be filed in consequence of theregaining by the defendant of possession of these two lots. There is nowno dispute in respect of lot 3 which did not belong to either of the
mortgagors who executed D1 and D2.
The law regarding the validity and effect of transactions relating tointerests in land during the pendency of partition proceedings was con-sidered by a bench of three judges of this Court in Sirisoma v. SameltsAppuhamy 1, and that bench, in laying down certain propositions assettled law, stated inter alia,
“ If such an instrument is in effect only an agreement to alienate orhypothecate a future interest, if and when acquired, no rights ofownership, or hypothecary rights (as the case may be) pass to the
1 (1950) 51 N. L. R. 337.
T. S. FERNANDO, J.—Don Petris v. Marajringhe
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grantee upon the acquisition of that interest by the grantor unless anduntil the agreement has been duly implemented ; if, without implementingthis agreement, the grantor conveys to a third party the rights whichhe has acquired under the decree, the competing claims of that thirdparty and of the original grantee must be determined with referenceto other legal principles such as the application of section 93 of theTrusts Ordinance.”
Now, section 93 of the Trusts Ordinance enacts that where a personacquires property with notice that another person has entered into anexisting contract affecting that property, of which specific performancecould be enforced, the former must hold the property for the benefit ofthe latter to the extent necessary to give effect to the contract. In thecase of Silva v. Salo Nona this court held that due registration of anagreement to sell land is of itself notice, within the meaning of section 93of the Trusts Ordinance, to a person who acquires the land subsequent tosuch agreement. The trial judge, in holding against the plaintiff, hasbeen influenced by the opinion he has formed that the expression“ property ” in section 93 cannot include rights on a mortgage. If thisopinion is correct a mortgagee is in a more advantageous position thaneven a transferee. On behalf of the plaintiff it has been contended thatthis opinion is erroneous, and, indeed, that it was erroneous was notseriously disputed by learned counsel for the defendant.
Confining myself to the case before me, we have here not merely amortgage of immovable property in favour of the defendant, but ausufructuary mortgage at that, the mortgagor undertaking to allowpossession of the land and actually giving over possession to themortgagee.
We were referred to Voet’s Classification of Things in Book 1, Title 8,section 27 (1 Gane’s transl. p. 172) as indicating that the only dispute inregard to debts, whether carrying interest or not, supported by hypothecof immovables was whether they were to be considered movable orimmovable, not that they were not within the classification of things orproperty. The nature of the rights of a usufructuary mortgagee is setout by Voet in Book XX, Title I which deals with the Contract of Pledgeand Hypothec. In section 23 (see 3 Gane’s Translation, p. 499), thepaclum antichreseos is described as follows :—“ But an agreement ofantichresis is particularly approved in mortgages. It is arranged bysuch agreement that the creditor shall use the mortgaged property inplace of interest until the debt has been paid, whether he wishes himselfto reap the fruits or advantages by living, in the house or by tilling thefarms, or to let them out to others. So much is this so that if he has lostpossession before the debt has been fully paid he can either follow up theproperty put under obligation in a hypothecary action in accord with thecommon nature of hypothecs, or can employ an action in factum torecover his antichresis or the reciprocal use of the mortgaged propertyin return for his advance.” I am of opinion that the contention ofplaintiff’s counsel is correct, and that when the defendant entered into
1 {1930) 32 N. L. R. 81.
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T. S. FERNANDO, J.—Don Petris v. Marasinghe
possession of lots 2 and 4 by virtue of bonds D1 and D2 he acquiredproperty within the meaning of section 93 of the Trusts Ordinance. Imight here add that, in the case of Kameswaramma v. Sitaramaniya *, theHigh Court of Madras has held that where a mortgagee, at the time of hismortgage, is aware of circumstances which ought to have put him onenquiry, and such enquiry, if made, would have revealed the existence ofan agreement by the mortgagor to mortgage the property to a thirdparty, the mortgagee’s rights will, on the principles embodied in section40 of the Transfer of Property Act and section 91 of the Trusts Act(same as section 93 of our Trusts Ordinance) be postponed to the rightsof such third party.
Learned counsel for the defendant endeavoured to support thejudgment appealed against by arguing that section 93 had no applicationin that, (i) P4 having been executed before action was filed, there wastherefore no contract thereafter existing of which specific performancecould have been enforced and (ii) the defendant being obliged to hold theproperty for the benefit of the plaintiff only to the extent necessary togive effect to the contract, and the contract having been performed bythe execution of P4, no question of necessity to give effect to the contractremained. He relied on certain decisions of the Indian Courts, but itbecomes unnecessary to examine them here as in determining whetherthere was an existing contract of which specific performance could beenforced the relevant date or dates in this case were the respective datesof the execution of Dl and D2. As at those dates there existedcontract PI of which specific performance could have been enforced. Asfor the contract having been performed by the execution of P4, theargument overlooks the fact that the contract evidenced by PI was acontract to transfer title free from encumbrances and not a title subjectto Dl and D2. I am unable to uphold the argument for the defendant.The plaintiff was, in my opinion, entitled to the protection of section 93of the Trusts Ordinance. It follows that Dl and D2 cannot prevail overP4, and the plaintiff was entitled to possession as against the defendant.
The decree appealed against is hereby set aside. Let a fresh decree beentered in favour of the plaintiff declaring him entitled to the landsdescribed in the first and third schedules to the plaint and ordering theejectment of the defendant therefrom, and incorporating therein also anorder for damages as from 16th August 1963 till restoration of possessionto the plaintiff in such sum as may be determined by the District Court,after further evidence, if necessary. The defendant must pay theplaintiff the costs of the trial and of this appeal.
Siva Supbamaniam, J.—I agree.
Samerawickbame, J.—I agree.
Decree set aside.
» (1905) 29 I. L. R. (Madras) 177.