Mohamed Lebbe v. Cader Lebbe.
1936Present : Soertsz J. and Fernando A.J.
MOHAMED LEBBE v. CADER LEBBE327—D. C. Kandy, 46,405.
Cheetu club—Mortgage bond to secure payment of money due—Bondand unenforceable—Action by assignee.
A mortgage bond given to secure payment of money due to a
club is invalid. Such a bond is unenforceable in the hands offide assignee for value.
Sinnathurai v. Chinniah (10 N. L. R. 5) followed.
Narayani v. Kanapathy (6 S. C. C. 68) referred to.
^^PPEAL from a judgment of the District Judge of Kandy.
H. V. Perera (with him Rajapakse), for plaintiff, appellant.Navaratnam (with him Gratiaen), fpr defendant, respondent.
Cur. adv. vult.
SOERTSZ J.—Mohamed Lebbe v. Coder Lebbe.
February 1, 1937. Soertsz J.—
The plaintiff (appellant) brought this action against the legalrepresentative of one Seyad Lebbe Noor Mohamadu to recover a sum ofRs. 575 balance principal and Rs. 303 interest said to be due on a mortgagebond given by the said Noor Mohamadu Lebbe to one Ismail LebbeSeyadu Mohamadu Lebbe and by him assigned to the plaintiff appellant.
The defendant filed answer admitting the execution of the bond butstating that it was not enforceable because it was given by Noor Moha-madu Lebbe to secure contributions due by him to a lottery cheetu, and,therefore, in furtherance of a lottery; that, as a matter of fact, theamount due by way of contributions had been, paid, that Ismail LebbeSeyadu Mohamadu Lebbe, the mortgagee and manager of the cheetuclub, acting fraudulently and in collusion with the plaintiff, had assignedthe bond to him.
The tried Judge found that the mortgage bond had been given in thecircumstances alleged in the answer, and that, therefore, the bond wasnot enforceable. He also found that the amount due had been paid.He dismissed the plaintiff’s action with costs. There is sufficientevidence to support the findings of fact that the bond was given in thecircumstances alleged. In my opinion, the evidence on the issue whetherthe amount due had been paid is altogether unsatisfactory, and thetrial Judge should have answered that issue against the defendant.But this is of no practical consequence in this case in view of the con-clusions I reach on the earlier question. That question is with regardto the position in law of the plaintiff who had taken an assignmentof a bond given to secure payments due to a lottery club in furtheranceof a lottery."
I will, in the first instance, consider this question on the assumptionthat the plaintiff was not aware of the circumstances in which the bondhad been given. The evidence led shows that the mortgagor NoorMohamadu Lebbe was a member of a lottery cheetu club and that themortgagee Ismail Lebbe Seyadu Mohamadu Lebbe was the managerof the club. There were forty members in all, each contributing monthlyRs. 25. The pool went from time to time to the member who drew thewinning number in a lottery. This was clearly against the law. Itoffends against the provisions of the Lotteries Ordinance, No. 3 of 1844,particularly against sections 3 and 5.
In Sinnathurai v. Chinniah1 a Bench of three Judges held that cheetuclub where the prizes were distributed by lot were within the scope ofthe Lotteries Ordinance. Hutchinson C.J. who delivered the judgmentof the Court commenting on the argument that “there were no prizesinasmuch as every person who joins the club simply got back all hismoney and neither more or less ” said the advantage is the gettingof the use of the money at the beginning of the term—£10 in hand isbetter than £10 a year or two hence. The advantage is to get it atonce, and getting that advantage by means of lot's you get a prize.”
In this sense Noor Mohamadu had drawn a prize and when he gavehis bond to secure the future payment of contributions, he was promoting
110 N. L. B. 5.
422SOERTSZ J.—Mohamed Lebbe v. Coder Lebbe.
this arrangement. He thus entered into an illegal transaction, and thebond was invalid and unenforceable. The mortgagee could not sueupon it. Is the position different now that the bond has been assignedby the mortgagee without the concurrence of the mortgagor to theplaintiff?
After careful consideration, I think the question must be answeredin the negative. In Eaton v. Registrar of Deeds1, de Villiers C.J. said : —
“ I may, however, point out that there is material difference betweena negotiable instrument, such as a promissory note, and a mortgagebond in regard to the rights of a transferee. In the case of such anegotiable instrument, if the-endorsee who delivers it can by the lawof the country m which the delivery takes place, give a valid title tothe bill, the endorsee can, as a general rule, recover the debt from thedebtor whatever defence such debtor 'might have against the endorser.In the case of a mortgage bond, however, the cessionary acquires nogreater rights than the cedent, so that if the latter cannot sue on theinstrument he cannot, as a general rule, transmit a right to the formerto sue thereon. ”
This is the logical result of the history of the assignment of obliga-tions.
The Roman law did not permit' the assignment of an obligationwhich was considered an essentially personal relation. The .only wayin which an obligation could have been transferred was by novationwhich by its very nature required the consent and participation of thedebtor. The first step towards making assignments of obligation possiblewas taken when the Roman law under the formulary procedure, enableda man to sue for another or on his behalf. But a person suing throughanother could be repelled by all the defences available against him,for, although not nominally, he was really the plaintiff. The otherwas acting as on mandatum actionis. Sande observes, “The Romanjurists held that such mandatum actionis did not necessitate a transferenceof an obligation, for the original creditor still remained the true andonly creditor; the sole result was that the right of action passed, to wit,that the procurator was invested with the capacity of exercising theoriginal creditor’s right of action, and that the procurator could onlyassert or realize the claim of another person. Though this cessio nominumor actiomim dispensed with the debtor’s consent, it was extremelyimperfect and defective, for until litis contestatio the assignee of thenomen has no direct relation with the debtor. Moreover, the appoint-ment of the creditor’s procurator was governed by the rules of Mandatum.If the creditor revoked the mandate or if he died, the mandate wasextinguished. The mandatarius. in rem suam has no right in respectof the debt he sues for, and in the eye of the law he is not the creditor,but only the agent, with the difference that as against the mandatorhe is not bound to hand over what he recovers from the debtor.
“ The praetor desiring to make transactions of this nature more elastic,introduced the fixed rule that a mandatum in rem suam should beirrevocable not only from the moment of litis contestatio, but from the
1 7 8.0. 254.
SOERTSZ J.—Mohamed Lebbe v. Coder Lebbe.
moment the debtor received notice of the manda'tum actionis. Fromthe moment of such notice being given the procurator has an incontest-ible right to claim payment from the debtor, who could then no longermake a valid payment to the original creditor. Here we have the firstindications of the idea of assignment. In course of time the mandatumad agendum granted in pursuance of a transaction by which the partiespurported to transfer the obligation was immaterial. The essentialpart was the transaction itself, in a word, the act of assignment. ”
But all along the position of the procurator was no better than thatof his principal. “ The complete transferability of obligations wasunknown to jurisprudence until modern legislation gave validity tocontracts with an incerta persona, e.g., bills of exchange or other negotiableinstruments ”.
I have made these lengthly quotations because they elucidate the reasonfor the distinction drawn by de Villiers C.J. in Eaton v. Registrar of Deeds(supra) and help us to overcome such surprise as was felt by BurnsideC.J. when in Narayani v. Kanapathy', he said in circumstances some-what similar to these—that is on the hypothesis that the plaintiffin this case took assignment for value and without notice of the defect—“ We must confess that it does seem contrary to natural justice that adefendant should by his solemn act or deed admit and thus hold out toothers that he had received money consideration for his bond, andpromise to pay the amount to the obligee and his assigns and afterwardsbe permitted to say that he had in fact received no consideration Herefers to Burge who says, “All defences competent to a debtor on amovable debt against the original creditor …. continue relevanteven against an onerous assignee because no assignee can be in betterposition than his cedent—that was a case where the plea was a totalfailure of consideration—but the learned Chief Justice went on to statethat the authorities were clear that it was open to the defendant so tocontend. This state of the law entails no real hardship, for assigneescan always secure their positions by requiring the consent of thedebtor to the assignment.
In this case there was no such concurrence on the part of the debtorthat is the mortgagor, and inasmuch, therefore, as it was open to himto plead or prove this defence against his mortgagee, notwithstandingthe statement in the bond that it was given for money borrowed andreceived, it remains open to the present defendant who is the legalrepresentative of the mortgagor to set it up against the assignee of themortgage bond.
English jurisprudence reached the same position by a different routeand the law is that the “ assignee takes subject to equities, that is subjectto all such defences as might have prevailed against the assignor. Inother words, the assignor cannot give a better title than he has got(Anson.)
therefore, am of opinion that the plaintiff’s action fails becausethe bond he sues upon is tainted with illegality. The appeal must bedismissed with costs.
1 6 s. c. c. 68.424
SOERTSZ J.—Mohamed Lebbe v. Coder Lebbe.
I only wish to add that in this case even the argumentam ad misereordiamof hardship to the plaintiff does not ring true because there is evidenceto show that the plaintiff who was himself a member of the cheetu clubknew full well the circumstances in which the bond was given.
Fernando A.J.—I agree.
MOHAMED LEBBE v. CADER LEBBE