096-NLR-NLR-V-24-MORAES-et-al.-v.-NALLAN-CHETTY.pdf
( 297 )
[Full Bench]
Present : Bertram C.J. and De Sampayo and Garvin .]•}.
MORAES ct dl. v. NALLAN CHETTY. .
321—D. C. Kandy, 29,596.
Mortgage—Civil Procedure Code, ss. 640-644—Address not registered bymortgagee—Sale by second mortgagee under his decree—Secondmortgagee not a parly to action by first mortgagee—Is purchaser atsale under decree of second mortgagee bound by the first mortgage?
Where a registered mortgagee did not register his address, andbrought an action on his bond without making n subsequentmortgagee a party, or giving him notice of the action, and where thesubsequent mortgagee obtained judgment on his bond before thefirst mortgagee instituted his action, and sold in execution themortgaged property before it was seized under the decree obtainedby the first mortgagee,—
Held, that the purchaser at the ■ sale' in execution under -thedecree obtained by the second mortgagee took the property subjectto the first mortgage.
X.
The effect of not registering address by primary mortgagee discussed.Svppramaniam Chetty v. Weerasekera1 considered.
HE facts are set out in the judgment of the Chief Justice.
8amarawickreme (with him Hay ley), for the appellant.—Thesections of the Code relating to mortgage actions merely lay downa quick and expeditious procedure for the enforcing of the rights ofa primary mortgagee. If the intention of the Legislature was to
* (1918) go N. L. R. 170.
1928.
( 298 )
1828.
Moraes v. .NalUtn,
• OhtMy
create, by means of these sections, substantive law supersedingthe common law, the Legislature would have proceeded to makethe change in explicit terms. If this contention is correct, then,the failure of a primary mortgagee to register his address does merelydeprive, him of the privilege of obtaining in one and the same action adecree binding not only his mortgagor, hut also all puisne incum-brancers. Any conflicting interests that may exist between amortgagee and a puisne incumbrancer cun form the subject of aseparate and subsequent action, and can be adjudicated upon.
E. W. Jayawardene (with him Croon-Da Brera and Navarat-nam), for the respondent.—The Code imposes on a mortgagee apositive obligation to register his address. The compliance by themortgagee with the requirements of the sections of the Code is a“ condition precedent to a puisne incumbrancer 'being bound eitherdirectly or indirectly by the decree in a mortgage.” This principlehas been recognized and followed in a series of decisions. InAppuhamy v. Naide 1 it was held that compliance with section 643in the matter of registering an address for service was a conditionprecedent to success, and that a subsequent purchaser was notbound by the mortgage decree. The Full Court in Suppramaniam v.TVeerasehera (supra) definitely held that only one action was nowsurviving to a mortgagee, and that was the action under chapterXLVI. of the Code. The failure of the primary mortgagee to registerhis address is -a fatal defect ; and his lights against subsequentincumbrancers when he has not made parties to his mortgage actionare completely wiped out.
The following cases were cited at the argument.—23 N. L. R.176 ; 20 N. L. R. 170 ; 4 N. L. R. 42 ; 14 N. L. R. 177 ; 12 N. L. R.139 ; 2 S. C. C. 146 ; 6 N. h. R. 220 ; 14 N. L. R. 47 ; 16 N. L. R.210 ; 9 N. L. R. 359.
Cur. adv. vult.
March 20, 1923. Bertram C.J.—
In this case we are called upon to discuss a question which hasbeen repeatedly discussed before, namely, the effect to be imputedto sections 643 and 644 of the Civil Procedure Code which deal withregistration of the addresses of mortgagees, and of section 640 whichdeclares that the mortgagor must always be a party to a mortgageaction. The contest in this case is between a primary mortgagee,who had never registered his address and is now seeking to realizehis security by sale of the mortgage property, and certain personsclaiming under a sale effected by a secondary mortgagee in executionof his mortgage.
The dates material to the contending claims are as follows : Bothmortgages were executed by one Eleanor Downall. The primary
‘(1919) 21 N. L. B. 173.
( 299 )
mortgage, on which the defendant relies, was executed on September 1029.15, 1910, registered on October 14, 1910, put in suit on February Bkrtbam2, 1917, and reduced to judgment on April 24, 1917. The decree. c-J*was never registered. The property was seized in execution of the Momee «.mortgage decree on June 20, 1921.
CZAefly
The details with regard to the second mortgage are as follows: Itwas executed on July 14, 1912, registered on August 16, 1912, putin suit on November 27, 1913, and reduced to judgment on March28, 1916. The decree was registered on April 15, 1916, and theproperty seized in execution on May 8, 1917. It was sold on June20, 1917, to W. J. Soysa, and a Fiscal's transfer was issued onSeptember 15. J917, and duly registered on October 23, 1917. OnFebruary 27, 1919, W. J. Soysa sold to plaintiffs. The history ofthe somewhat complicated proceedings out- of which this matteroriginates will be found in the case of Abeyainghe v. RdkTsana.1 Itis sufficient to say that the defendant seized in pursuance of anopinion expressed by this Court that the land was still subject to hisprimary mortgage. When the seizure was effected plaintiffs olaimedthe land. It was found against them that they were not in possession,and they were, consequently, reduced to bringing this action undersection 247 of the Civil Procedure Code.
What plaintiffs in effect claim is that through nonregistrationof his' address defendant’s primary mortgage is wiped out. Aprimary mortgagee, in fact, who has not registered his address, cannotset up his mortgage against a secondary mortgagee, or a personclaiming under a sale in execution of the secondary mortgage. Thisis said to be the constructive effect of the sections of the CivilProcedure Code above referred to.
The sections in question have been the subject of a series ofdecisions and it has been declared in those decisions that if aprimary mortgagee does net register his address, and does notmake a puisne incumbrancer a party to the mortgage action, hecannot, when he discovers the existence of the puisne incumbrancerafter the mortgage action, bring a fresh action, against him. Thepuisne incumbrancer in such a case can hold the land free of themortgage and snap his fingers at the primary mortgagee.
In all the cases in which it has been so held, the puisneincumbrancer was always a person claiming title to the land in someWay or other, that is, as transferee, donee, or lessee, and in most ofthe cases, though not in all of them, he was a person in possession.
The result of these decisions is obviously very unsatisfactory, andit is difficult to see how it can be described as just. Why should amortgagee, because he has omitted a formality of this description,be deprived of the results of his mortgage ? Why should he bedeprived of the right of enforcing his rights against a purchaser fromthe mortgagor of whose existence -he was in ignorance at the time
1 (1929) 22 N.L, B. 397.
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IMS.
Bbrt^ahO. J.
Moraee v.&aHan■Chetty
of bis mortgage action ? Why should a person who has purchasedlands subject to a mortgage be permitted to ignore the claims ofthe mortgagee, simply because the latter has not registered hisaddress ?
It has been found possible in two recent cases to escape from thisposition in so far as it affects secondary mortgagees. Those casesare Patera v. Kapuruhamy 1 and Waniyasekera v. Ukkuwa.* Asimilar question arises in the present/ cuse. Can a primary mort-gagee, who has never registered his ^address, set up any rights hemay have acquired in pursuance of that mortgage as a defenceagainst persons claiming under a sale in execution of a secondarymortgage ?
The difficulty of determining this question arises from the factthat we are called upon to interpret, not so much the words of thesesections of the Code, but a superstructure of principles, which, by alogical process, has been developed by the decisions of this Court.These decisions have sought to give effect to certain intentionswhich the Legislature was presumed to entertain, but which it hasomitted to express. The position is thus an artificial one, and weare invited to extend it by affirming further principles which areclaimed to be the necessary corollaries of previous decisions of thisCourt. We are asked to extend this superstructure in two ways.Firstly, by applying to secondary mortgagees what has hithertoonly been applied to grantees, donees, W lessess ; secondly, byasserting that what a mortgagee may not set up in attack he maynot set .up in defence, or, as it has been put in other connections,that he may not use as a shield a contention which the law doesnot permit him to use as a sword.
Before we commit ourselves to these extensious, it would, I
•
think, be well that we should once more carefully examine, in thefirst place, what precisely it is that the sections of the Code say ; and,secondly, to what extent we are bound by these previous decisions.
In addressing ourselves to this inquiry, we shall have to considerthe rights of secondary mortgagees.
I do not propose to discuss the law on this point in detail as itstood before the enactment of these sections. A very vigorous andtrenchant disquisition on the pure law of the subject will be foundin the Report of the Mortgage Law Commission of 1885, embodiedas a Sessional Paper for that year and printed ns an Appendix toMr. Hector Jayawardene’s book' on the Law of Mortgage. Withregard to the actual law of Ceylon on the subject, I am content torefer to what has been said by my 'brother De Sampayo, and to takeit as settled law, notwithstanding the opinion of Mr. Berwick, thatwhere a secondary mortgagee sells land in execution of a mortgage,he does so subject to the rights of the primary mortgagee.
i {1921) 23 N. L. B. 176.
* {1923) 162, D. C. Kurunegala, S. C. Min., Jan. 26, 1923.
( 301 )
Iiet us then first consider sections 643 and 644. They in effectdeclare that a mortgagee by registering his address and by givingnotice to any subsequent incumbrancers, who have notified him oftheir registered deeds and of their own addresses, shall be able, whenhe seeks to realize his mortgage, to bind by his judgment all suchsubsequent incumbrancers, who have not themselves applied to bejoined as fully and effectually as if he had made them actual partiesto the action. That, it seems to me. is all that the sections say. Itis accepted that they were intended to confer certain advantagesupon a mortgagee, who availed himself of the prescribed procedure,and it is obviously both reasonable and logical to say that com-pliance with the provisions of the section is a condition precedent tothe mortgagee obtaining these advantages. See per Iiascelles A.C.J.in Peiris v. Weerasinghe.l But what if he does not comply with thisspecial procedure ? Then, surely, so far as these particular sectionsare concerned, all that happens is that he loses those advantages,and nothing more.
1928.
0. J.
Moraes v.NationOhms
He is not put in a better position by the sections, but there isnothing in the sections to put him in a worse. All that happens isthat if it is necessary for him to bind a puisne incumbrancer, he mustdo it in the ordinary manner required by law. Indeed, in one case(Rowel v. Jayawardene 2) the Court went further and declared thatwhere the puisne incumbrancer had. in fact, been noticed, he wasbound by the decree, even though the primary mortgagee had notregistered, his address.
In one case, however, the penalization of the mortgagee has beenexpressed in much stronger terms. I refer to Eliyatamby ». VaUi-amma,s and, in particular, to the observations of Wood Benton J. on• page 213. He there declares that ** compliance by the mortgageewith the requirements of these sections is a condition precedent toa puisne incumbrancer being bound, either directly or indirectly, bythe decree in the mortgage action.” He seems to imply that thelaw imposes on the mortgagee a positive obligation to register hisaddress, and that the mortgagee cannot cure his .omission toregister it, either by giving actual notice to the puisne incumbrancer,or even by making him a party to the action. With very greatrespect for the high authority of the learned Judge, I am unablemyself to see how this principle can be deduced from the words ofthe sections.
The real section upon which all the determining decisions havebeen given has not been section 643 or 644, but a previous section,640. Sections 643 and 644 have been referred to-imply for the pur-pose of throwing light on the supposed meaning of section 640.What is it then that section 640 actually says ? It says simply thata mortgagor must be a party to every action for the realization of a
1 (190$) 9 N. L. B. 3S9.* (1910) 14 N. L. R. 47.
* (1913) 1$ N. L. B. 210.
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Moraes
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Chetty
mortgage. It is this comparatively simple enactment which has 'been the basis of the superstructure above referred to. It has infact been declared that in so enacting it was the intention of theLegislature to declare that the mortgagee must embrace all claimsagainst all persons concerned in a single action, and that if owing toignorance or mistake he does not do so, he cannot bring a supple- :mentary action afterwards. If, then, when the Legislature saidthat the mortgagor (or someone representing him) must be a partyto every mortgage action, it really intended to say that the mort-gagee should be allowed one action, and one action only for thepurpose of asserting all his rights, it certainly adopted a mostsingular method of expressing its intentions. I find it difficult tobelieve that those responsible for drafting the section had any suchconscious idea in their minds.
This, nevertheless, has in effect been held by a series of decision*:Purtchi Kira v. Sangu,1 Peiris v. Weerasinghe (supra), WeerappaChetty v. Arunasalam. Chetty,2 Ramanathan Chetty v. Cassim,3 andEliyatamby v. Valliamma (supra), and these decisions have beenconfirmed by a decision of the Full Court in Suppramaniam Chsttyv. Weerasekera (supra).
The – ratio decidendi of that decision is not unanimously formu-lated. Ennis J. bases his judgment on the supposed generalintention of the chapter, and here he is in accord with what appearsto be the spirit of the previous cases. Shaw J., however, puts thecase on another ground, viz., that “ if the mortgagor or his repreBentatives has been sued and a decree obtained against him in thefiret action, he cannot again be sued in a subsequent action in respectof the same matter." Herein he is proceeding on somewhat thesame lines as Middleton J. in Ramanathan Chetty v. Cassim (supra),•where he bases his decision on section 34 of the Civil Procedure Code,«$ghich requires every plaintiff to include all his remedies in one action,«B3$ess he dbtains the previous consent of the Court to do otherwise.JDe fSampayo J. simply concurred in the decision with a view toisettling the law.
With regard to what is.said by Shaw J. and Middleton J., I findmyself unable to concur. I see no difficulty in the mortgagor beingmade a formal party to a subsequent action, provided that his costsare paid. As to section 34, the remedies there refereed to seem tome to be remedies which might be sought against the same defend-ant. However this may be, these expressions of opinion by Shaw J.and Middleton J. are probably best regarded as incidental only.The Case of Suppramaniam Chetty v. Weerasekera (supra) may beconsidered as based upon the principle enunciated by Ennis J. whogave the principal judgment.
1 (1900) 4 N. L. R. 42.a (1909) 12 N. L. R. 139.
* (1911) 14 N. L. R. 177.
( 803 )
As I myself read the section, section 640 simply declares that themortgagor should be a party defendant to every mortgage action,and sections 648 and 644, for the convenience of the mortgagee,provide machinery by which a written notice to a puisne incum-brancer may be substituted for his formal joinder as a party. In anycase, we are bound by the Full Court decision to the full extent towhich it goes, but the question for us in this case is to what extentdoes it actually go ?
1938.
BertramO, J.
Moraes v.
Nallltn
Chetty
It may be accepted, until the law is amended, that it is the im-plied intention of section 640 that a mortgagee shall not afterwardsassert against a puisne incumbrancer a claim which he might haveasserted in the original mortgage action. But surely this can onlybe the case with respect to' a claim which it was necessary for him toassert in order to establish his rights. Was it, then necessary for amortgagee to assert any claim at all against a secondary mortgagee ?Was there anything which compelled him to make a secondarymortgagee a party go a mortgage action ? It seems clear that therewas not. Under the pure Roman-Dutch law, as expounded byMr. Berwick, there was certainly no such obligation on the primarymortgagee. With regard to our own law as developed by practice,nil that can be said is that in. Oriental Bank v. Nayanatler el al.,*which was a case in which the secondary mortgagee asked tobe joined, Clarence J. expressed the opinion that the primary mort-gagee ought to join in his action any secondary mortgagee of whomhe had notice, but the question really to be decided was, whether asecondary mortgagee might be joined, if he so desired. Further,Bayard C.J. in Mayappa Chetty v. JRawter – held that there wasnothing in the Civil Procedure Code to prevent a primary mortgageejoining a secondary mortgagee as defendant in his suit to realisethe mortgage. But this was a case in which the primary mortgageewanted to join the secondary mortgagees and the latter objected.In many cases it is certainly most reasonable and convenient that asecondary mortgagee should be joined. Accounts might be goneinto for the purpose of settling the mortgage debt in 'which hemight be interested, and he clearly would not be bound by anysettlement of accounts in an action in .which he was not a party.But if he is so joined, he is not joined for the purpose of any orderto be made against him. Apart from any such question of accounts,he is really joined for his own information. But there is no decisionprior to the Code, and no enactment of the Code itself which requireshim to be joined.
There is, therefore, this distinction between the present case andthe previously decided cases. They declare that a mortgagee maynot bring a supplementary action to fill up a defect in his originalaction, but in all those cases there was a defect. The person notsued was a necessary party for the purpose of the realization of the
* {1879) 2 S. C. C. 146.* (1903) 6 N. L. R. 220.
( 804 )
1988. mortgage. In the present case the person not sued was not aBkbxr&m necessary party. In the present case, therefore, I see nothing to
J. prevent the primary mortgagee, if he had occasion to do so, fromMorozs v. asserting his rights under the primary mortgage as against any per-
Nation son claiming rights through or under the secondary moitgagee.
Chatty
But there is another distinction. The primary mortgagee is notbringing a supplementary action, he is only defending himselfwhen assailed. Is it settled law that what the mortgagee may notset up by way of attack, lie may not set up by way of defence ? TheFull Court decision of Suppramaniam■ Chetty v. Weerasekera (supra)does not cover this point. Wendt J. in Weerappa Chetty v. Aru-nasalam Chetty (supra) was disposed to think that a primar *mortgagee might set up his rights in reconvention.': Middletonsuggested that the judgment against the primary mortgagee in thatcase should be “ subject to such, rights thereon as the defendant maybe entitled to have declared to be in him by virtue of his mortgagedecree." It is not necessary for the purpose of this case to give adecision on this question. Certainly it would be anomalous in fact,though not necessarily impossible in law, that a mortgagee shouldassert in reconvention a right which he could not claim ina plaint, but in the present case, if the above reasoning is correct,there was nothing to prevent the mortgagee from asserting his rightsas against the secondary mortgagee in |ny way he thoughtnecessary.
It is no doubt the case that the distinction here asserted, betweena grantee and a mortgagee, was not contemplated in any of theprevious decisions to which reference has been made, but there wasno actual occasion in those cases to contemplate it. It is, at anyrate, satisfactory that such a distinction can now be made. It is,however, in my opinion, most unsatisfactory that it should benecessary to make it. I am unable to see the justice of the law asdeclared by Suppramaniam Chetty v. Weerasekera (supra). In myopinion it is most desirable that the law should be amended by theaddition of a proviso to section 640 of the Civil Procedure Codedeclaring that nothing contained therein, or in the other sectionsof the chapter, should be deemed to preclude any mortgagee or otherperson aforesaid from bringing a subsequent action for the purposeof asserting any claim which might have been included in theoriginal action against any puisne incumbrancer, who, owing toignorance or mistake, had not been made a party or noticed forthe purpose of that action, subject to that order as to costs, orother relief as the Court may think just.
In the view I take of the case, it is not necessary for me to expressany opinion on the subsidiary question of lia pendens whichwas discussed in the argument.
In my opinion the appeal must be allowed, with costs.
( 805)
Be Sampayo J.—
I agree generally with the conclusions of my Lord the Chief Justicewith regal'd to the construction of sections 640, 643, and 644of the Civil Procedure Code, and I think that the defendant’s appealshould be allowed. With regard to Supprarnaniam Chetty v. Weera-sekera (supra), I need only point out, as I expressly said in my judg-ment, that I concurred in the opinion of the rest of the Court for thesake of conformity. My own opinion on the point involved is to befound in the main portion of my judgment and in Bodia v. Hawadia,1to which I referred.
1 wish to add a word on the contention strenuously urged by Mr.E. W. Jayawardene that the eifect of the execution sale under thesecondary mortgagee's writ was to wipe out the primary mortgage,and that the only right of the defendant who was the primarymortgagee was to claim the proceeds. This contention would beright if we were to apply the pure Roman-Butch law on the subjectof judicial sales. I need not here give references to the authorities ;they will be found collated at pages 45 and 46 of Mr. Hector Jaya-wardene’s book on the Law of Mortgage. I may point out, however,that the Roman-Butch rule is founded, not upon the nature of theremedies available to mortgagees, but upon the general result of anexecution sale of the debtor’s property at the instance of a creditor,whether secured or unsecured. When a debtor’s property wasbrought under the hammer, there was, so to say, an informalinsolvency of the debtor, and the creditors of all sorts could onlyclaim proceeds, in preference or in concurrence, as the case might be.Notwithstanding the view taken in some of the old local decisions,a judicial sale in Ceylon had not the same significance. So long agoas 1838 it was held in B. C. Negombo, 7,999 (Morg. Dig., p. 12), that“ a sale in execution is an assignment by operation of law, and thepurchaser must take the property subject to the same conditionsand liable to the same forfeitures as it was subject and liable in thehands of the original owner.” In any case, it is very clear that underthe Fiscals’ Ordinance, No. 4 of 1867, the sale is only of the right,title, and interest ” of the debtor, and it necessarily follows that any-existing burdens on the property remain in force, and for satisfyingsuch burdens the ^property could be pursued into the hands of thepurchaser. See also Fernando v. Bastian Pieris,2 which decided thata Fiscal’s sale had not the eifect of wipping off any prior incumbrances.Cayley J. observed that the Roman-Butch law did not obtain inCeylon in its integrity and in all its details, much less in its modes ofprocedure, and further noted that the conveyance provided by theFiscals’ Ordinance, No. 4 of 1867, passed to the purchaser only theright, title, and interest of the debtor -in the- property. Then followedLudovici v. Perera,* where it was declared by a strong Bench
» {19J3) 16 N. L. R. 463.* (1875) Rmn. Rep., 1872-76, V- 151.
3 (1878) 1 S. C. C. 22.
1988.
Monies v„NaUanChetty
( 306 )
J.
&'
htoraea
Holton
Chatty
y88, consisting of Phear C.J. and Clarence and Dias JJ. that “ the purchaser
Ba Sampayo at an execution sale obtains by his purchase such right or title to or
interest in the subject of property sold to him as the execution-debtorhas power to pass to him,” and Mr. Hector Jayawardene concludedthe discussion in his book as follows : “ Since 187S, in the case ofimmovable property our Courts have consistently followed the rulethat prevails at present, namely, that a sale of mortgaged pro-perty by the Fiscal does not wipe off existing mortgages, and thatthe mortgagee is not entitled to claim the proceeds of sale, and thata purchaser at such a sale buys the property- with all existingincumbrances.” The matter is now provided for in the same senseby the Civil Procedure Code, for section 352, which deals with therights to proceeds sale in Court, has the following‘proviso : —
“ Provided that, when any property is sold which is subject toa mortgage or charge …. the mortgagee orincumbrancer shall not as such be entitled to share in anyproceeds arising from such sale.”
It is thus clear that both under the law prior to the Code, and muchmore under the Code, any mortgage existing at the time of a judicialsale is not wiped out, but may be enforced in the usual way againstthe purchaser.
■Garvin J.—
This is a proceeding under the provisions of section 247 of the CivilProcedure Code. The defendant held a mortgage bearing No. 384dated September 15, 1910, and registered oil October 4 of the sameyear, of the interests of Eleanor Downall in the premises with whichthis section is concerned. He put his bond in suit on February 22,1917, in D. C. Kandy, No. 25,219, and obtained a hypothecary decreeon April 24, 1917. The interests were seized by the Fiscal on June20, 1921, and were then claimed by the present plaintiff.
In the interval between the obtaining of the decree and theseizure, certain other proceedings took place, into which it is notnecessary to enter.
The claim was disallowed, and the claimant brought this actionto have himself declared entitled to the subject under seizure, andto have it declared that those interests were not executable under ,the decree in No. 25,219. He succeeded, and the defendant appeals.
The present plaintiff himself makes title through EleanorDownall, who, by bond No. 202 of July 14, 1912, mortgaged theseveiy- interests with one Abeysinghe. That bond was put in suit in
C. Kandy, No. 25,777, on March 23, 1916, and decree was enteredin favour of Abeysinghe on March 23, 1916. The premises were seizednn May 8, 1917, and sold on June 28, 1917, to one W. J. Soysa, whoobtained a Fiscal's transfer on September 15, 1917. The plaintiffacquired Soysa’s interests by deed No. 231 of February 27, 1921.
( 307 )
The plaintiff has certainly proved that his predecessor, W. J.1®®8.
Soysa, had acquired Eleanor Downall's interests at the sale heldGabvut J.
on June 28, 1917. But that was a sale which was held after the——
District Court had expressly decreed that the present defendant, asNaOam*
the holder of a mortgage prior in date and prior also in the matterChett#
of registration, was entitled to a hypothecary decree was dulyentered. The defendant contends that such title as Soysa mayhave purchased is necessarily subject to, and without prejudice to,his rights to execute the hypothecary decree entered in his favour.
From this position the plaintiff seeks to escape by contendingthat neither he nor W. J. Soysa, his predecessor in title, were partiesto the defendant’s hypothecary action No. 25,219, and are not,therefore, bound by it. But it is manifest that it was impossibleto make them parties, for the reason that neither Soysa nor theplaintiff had acquired title to or possession of the premises till sometime subsequent to the institution of that action, and not till afterthat action had .terminated in defendant’s favour. W. J. Soysawas in the position of a person who acquired the interests of aperson who acquired interests of a party to an action after ahypothecary decree affecting those interests had been entered infavour of the other party, and the plaintiff’s position is no betterthan that of his vendor.
The plaintiff is therefore driven to take his stand upon his maincontention, that inasmuch as defendant, when he registered hismortgage, did not also register an address to which the noticescontemplated by sections 642 and 643 of the Civil Procedure Codemight be forwarded by subsequent grantees or incumbrancers themortgage in his favour lost the benefits of priority over sub-sequent mortgages. In effect it is argued that the penalty offailure on the part of the primary mortgagee to register an addressis the total loss of his right to realize his security when there aresubsequent grantees or other incumbrancers within the meaningof section 642 of the Code, and that he' is left in the position of anunsecured creditor.
But nowhere does the Code expressly place a primary mortgageeunder a dear obligation to register such an address, nor does it saythat these drastic consequences are to be the penalty of failure tocomply with this supposed requirement.
The provisions which have been so often appealed to do no doubtprescribe a procedure which a primary mortgagee may, if he sodesires, follow, and if he does so, the decree obtained by him willbind, not only the defendant, but “ every grantee, mortgagee, lessee,or other incumbrancer whose deed shall not have been registered,or who shall not have furnished such address as aforesaid.”
A decree which frees the property undei mortgage of all andevery claim by persons who have acquired any and every interestin or charge over these premises from or through the mortgagor
( 308 )
1988.
Gabvxn J.
Montes v.NattanChatty
What was the position of a mortgagee prior to the enactment ofthe Civil Procedure Code ? He had a personal action against thedebtor, and a hypothecary action to enforce his right to attach theproperty under mortgage against the person in possession of theproperty (Voet 20, 4, 3 ; Grotius 2, 45, 33). It was competentto him to pursue these remedies separately or together when themortgagor was in possession. As regards subsequent or secondarymortgagees and other incumbrancers nob in possession, he wantednothing from them, and he was not required as a condition precedentto being granted a hypothecary decree to join them so long as theywere not in possession. They were not necessary. parties to thehypothecary action.
When property was sold in pursuance of a hypothecary decreeobtained by a subsequent or secondary mortgagee, the purchasertook the property subject to the primary mortgage (Ramanathon,1875—151, 1 C. D. R. 1, 6 N. L..R. 169), it being well-settled law inCeylon that a purchaser at a Fiscal’s sale buys the property with allexisting incumbrances, and does not obtain an indefeasible title.The special sanctity and credit attached by the Roman-Dutch lawas the same obtained in Ceylon has certainly never been admittedfor the last fifty years (Grenier, 1875, p. 22).
On the other hand, a sale under a hypothecary decree obtainedby a primary mortgagee in a properly constituted action to whichpersons in possession were parties passed to the purchaser the titleof the mortgagor as at the date of the mortgage.
To what extent, if at all, has the position been altered by the CivilProcedure Code ? The material sections are 640 and 643. It isprovided by section 640 as follows: —
“ Every mortgagee or person entitled to bring any action for therealization of moneys secured to him upon a mortgage shallsue the mortgagor as defendant, whether such mortgagoris or is not in possession.”
In the case of Punchi Kira v. Sangu (supra), Bonser C.J. interpretedthat section as abolishing the right given by the Roman-Dutch lawto a mortgagee to sue the party in possession without joining the
subsequent to the first mortgage is a decree which a primary mort-gagee will ordinarily be well advised to obtain, but the mere factthat a means of obtaining such a decree has been provided does not ofitself convey to my mind that it was the intention of the Legislatureto deprive the primary mortgagee of his right to obtain a decree,which, though it may not effectually and for all purposes bind allsubsequent ” grantees, lessees, mortgagees, or other incumbrancers,”is still effective to bind' such subsequent ” incumbrancers,” as hedeems it sufficient or necessary to bind for the purpose he has inview.
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mortgagor in the action. There remained some uncertainty asto whether a mortgagee who had obtained judgment against hismortgagor may not maintain a second action to biud persons whowere in possession at the time when he instituted hi.s action againsthis mortgagor. The law has been set at rest by the decision oi aFull Bench in the case of Suppramaniam Chetty v. Weeraaekera(supra), the effect of which is summarised in the judgment of Shaw J.as follows.—
“ It (the Civil Procedure Code) did not take away the old commonlaw remedies, but renders it necessary for them all to besought in one action."
Section 640 has thus been interpreted as altering the law to theextent that a mortgagee must now seek all his remedies in oneaction, and that it is no longer open to him to proceed in a secondaction against persons whom he should have made, but did notmake, parties to the one action permitted to him..
Neither this nor any other case referred to in the course of theargument has held that the right of a primary mortgagee to obtaina valid hypothecaiy decree by suing in one action the mortgagor,and where persons other than the mortgagor are in possession, themortgagor and those persons, has been abrogated; nor have we beenreferred to any authority for the proposition that failure on the partof a mortgagee to register an address deprives him of his commonlaw right to obtain a valid hypothecary decree by the hypothecaryaction given him by the common law so long as the mortgagor ismade a party defendant to that action.
Now, it is provided by section 643 that a mortgagee shall givenotice of his action to " all grantees, mortgagees, lessees, and otherincumbrancers" who have registered deeds in their favour, and whohave in all other respects complied in the matter of registration ofaddresses and giving of notice with the provisions of that section,and section 644 says that every person—
" so noticed not applying to be joined as defendants, andevery such grantee, mortgagee, lessee, or incumbrancerwhose deed shall not have been registered, and who shallnot have furnished such address as aforesaid, shall bebound by the action in all respects as fully as though hehad been a party thereto,"
hut the effect thus attached to a decree is made subject to theproviso that' the mortgagee has himself registered his address andfurnished to subsequent grantees, mortgagees, lessees, and otherincumbrancers who have complied with the provision of section643 with his address. It is nowhere stated that the decree is to bewholly inoperative if a primary mortgagee does not furnish such an
1928.
Gahvik J.
Montes e.
Nation
CheUy
( »10 )
1088.
Qabvik J,
Moraes v.MalianChetty
address. Indeed, it distinctly implies that all persons who havebeen made parties to the action will be bound by the decree, andthat is the position for which the appellant contends; for heargues that so long «6 a primary mortgagee has joined all thenecessary parties, a decree obtained in such an action is valid andbinding and has all the effect of a hypothecary decree under theRoman-Dutch law. Doubtless such grantees, mortgagees, lessees,and other incumbrancers as have not been made parties to theaction, and who have not received the notice contemplated by section643, will be entitled to claim that their rights remain intact. Thisis conceded; but what are their rights? There is nothing in. thesections to which I have referred which disclose any intention onthe part of the Legislature to enlarge the rights which they enjoyunder the common law, or to declare that from and after the date ofthe enactment of the Civil Procedure Code a primary mortgagee'srights to realize on his mortgage is conditional upon the registrationof an address and the giving of notice. If, as is contended, that isa condition precedent to the institution of such an action, 1 shouldhave expected the obligation to have been expressly and explicitlyplaced upon the mortgagee. As the section runs, this matter ofregistration of addresses is only a condition precedent to his obtain-ing for his decree the special effect of binding, not only the partiesto the action, but all subsequent grantees, mortgagees,' lessees, orother incumbrancers. The necessary parties to a hypothecaryaction are the mortgagor, and, in the case where he is not inpossession, the parties who are in possession of the property underthe mortgage. The advantage of complying with the provisions ofthe Civil Procedure Code is that not only such persons, but otherpersons falling within the category of grantee, mortgagee, lessee, orother incumbrancer, are for ever estopped and precluded frombringing an action for the purpose of impeaching the decree obtainedby the primary mortgagee or any other action available to them inlaw to protect their interests. If a primary mortgagee chooses toignore the benefits of these sections, he is at least entitled to claimfor his decree that effect which is accorded to it by common law.I am aware of no judgment of this Court which directly or indirectlydeclares that a primary mortgagee who Has not complied in thematter of notice with the provisions of section 643, but has com-plied in the matter of the constitution of his action with the require-ments of the common law, does not take a decree which has thebinding force accorded to a hypothecary decree by the common law.It would, indeed, be a serious thing to hold that a duly registeredprimary mortgage is to be subordinate to an unregistered secondarymortgage, unless the duty to register an address is clear, and unless itis clear also that failure to do so is to be visited by so drastic a penalty.In my opinion the provisions of the Civil Procedure Code have nottaken away the rights of action available to a mortgagee under the
( 311)
.Roman-Dutch law, except to the extent that where in the pastseveral actions were open to him he is now restricted to one action,in which he must join all necessary parties if he is to obtain a validhypothecary decree.
Since writing the above I have had the advantage of seeing thejudgment of my Lord the Chief Justice, with which I agree.
1988.
Oaavm J*
Moraee v.NaUanChetty
Set aside.