Murugappa Chetty v. Alpisingho.
Present: Akbar S.P.J. and Koch J.
MURUGAPPA CHETTY v. ALPISINGHO ex al.
417—D. C. Colombo, 27,787.
Mortgage action—Mortgage of shares to be allotted in partition action—Leasepending action—Mortgage subject to lease—Ordinance No. 10 of 1863,ss. 12, 13, 17.
The first and second defendants mortgaged with the plaintiff, duringthe pendency of a partition action the shares of the land to which theywould be declared entitled under the decree in the action. Thereafterthey executed a lease of their undivided interests to the third defendant,also during the pendency of the partition action.
Held (in an action brought by the plaintiff to enforce the mort-gage), that the mortgage was subject to the lease in favour of the thirddefendant.
LAINTIFF instituted this action against the first and seconddefendants to recover a sum of Rs. 4,000 and interest on a mortgage
bond dated March 26, 1924. The defendants by the bond mortgagedwith the plaintiff all that share and portion of the whole land which theyshall be declared entitled to in a partition action and all that share of theproceeds of sale of the said land in the event of a sale.
An action for the partition of the land had been instituted at thedate of the mortgage but neither interlocutory decree nor final decreehad been entered therein.
The third defendant was made a party to this action as he had obtaineda lease from the first and second defendants on June 23, 1927, which wasalso executed pending the partition action.
V. Perera (with him E. B. Wikramanayake), for third defendant,appellant.—The mortgage pending a partition action of the share to beultimately allotted to the mortgagor in the final decree creates no realright in the land. If it did, such right would be wiped out by the finaldecree. It is merely an agreement to mortgage (Fernando v. Atukorale').A lease pending a partition action is not obnoxious to the provisions ofsection 17 (Kirihamy v. Mudiyanse *, Appuhamy v. Nonis'). This lease ofan undivided share would operate from the date of its execution. Undersection 13 the lease would attach to the share allotted, to the mortgagorin severalty immediately final decree was entered. Therefore when themortgage came to be attached to the land allotted to the mortgagor itwould already be subject to the lease which would therefore have priorityover the mortgage.
N. E. Weerasooria (with him T. S. Fernando), for plaintiff, respondent.It was held by the Full Bench in Khan Bhai v. Perera1 that persons desiringto charge or dispose of their interests in a property subject to a partitionsuit can only do so by expressly charging or disposing of the interestto be ultimately allotted to them in the action. This is not obiter.The mortgage creates a real right. It would attach to the lot allotted
28 N. L. R. 292.
23 N. L. R. 272.
3 23 N. L. R. 415.* 26 N. L. R. 204.
AKBAR S.P.J.—Murugappa Chetty v. Alpisingho.
to the mortgagor directly final decree was entered. Section 12 is notconfined to mortgages executed before the filing of the action. Itwould include a case such as this. The mortgage deed is prior in dateand is registered. The lessee has notice of it. The mortgage documentis not a mere agreement to mortgage. It is an effective mortgage.(RajapaJcse v. Dassanayake )
Cur. adv. vuIt.
V. Perera, in reply.
May 20, 1936. Akbar S.P.J.—
In this appeal the question relating to the validity of alienations andhypothecations pending partition proceedings has arisen, a question onwhich there are a number of conflicting decisions by the Supreme Court.
The plaintiff-respondent instituted this action for the recovery ofRs. 4,000 and interest said to be due to him from the first and seconddefendants on a mortgage bond dated March 26, 1924. The thirddefendant-appellant was made a party to this action as he had obtaineda lease from the first and second defendants on June 22, 1927. Thismortgage action was brought on May 9, 1928, at which date a partitioncase (D. C. 5,256) relating to the land mortgaged was then pending.This partition case was instituted so far back as June 14, 1922, but thefinal decree was not entered till February 6, 1928. It will be seen thatat the date of the mortgage (March 26, 1924), the partition case hadalready been instituted but neither interlocutory decree (November 23,1925), nor final decree had been entered.
The mortgage bond, however, did not hypothecate undivided interestsof the first and second defendants in the land which was the subject-matter of the partition case but what it did mortgage was all that shareor portion of the whole land which they shall be declared entitled to inthe partition action and all that share of the proceeds of sale of the saidland as they shall be declared entitled to in the event of a sale in thepartition action. It will thus be seen that the mortgage bond was notaffected by section 17 of the Partition Ordinance.
Under section 17 of Ordinance No. 10 of 1863 what is prohibited .5 thealienation or hypothecation by any owner of an undivided share or interestin the land which is the subject of the partition action pending the case.
Under section 12 of the Ordinance nothing in the Ordinance is to affectthe right of “ any mortgagee of the land ” which is the subject of thepartition or sale, and the proviso to it provides that if the mortgage was ofan undivided interest the mortgage is to attach to the share in severaltyallotted to the mortgagor under the action. This section in view of theprohibition in section 17, can only refer to a mortgage executed priorto the partition action—nor can section 12 relate to the kind of mortgageheld by the plaintiff in this case, for this mortgage was a mortgage ofwhatever interest the mortgagors may be allotted under the decree inthe partition case. The opening words of section 12 that nothing shallaffect the right of any mortgagee of the land which is the subject of thepartition or sale cannot therefore relate to a mortgage like the plaintiff’sin this case even though section 17 does not affect his mortgage.
>■ 29 N. L. R. 509.
AKBAR S.P.J.—Murugappa Chetty v. Alpisingho.
,i In the case of the third defendant’s lease (D 1), however, the position isdifferent. By two decisions of the Supreme Court (Kirihamy v. Mudi-yanse1 and Appuhamy v. Nonis') a lease pending a partition case washeld not to be an alienation within the meaning of section 17 of theOrdinance. The two cases are exactly in point and are binding on me.As a matter of fact, if I may say so with respect, I agree with the reasonsgiven by Ennis J. and I am not prepared to disagree with those decisionson the judgment reported in Carron v. Fernando*, which only decidedthat a notarial lease created a real right in the land and did not purportto interpret section 17 of the Partition Ordinance. Under section 13 ofthe Ordinance immediately the decree was entered the lot given to thefirst and second defendants became subject to the leasehold rightscreated by D 1. As the plaintiff’s mortgage was over the shares to whichthe first and second defendants were to be declared entitled to under thepartition decree, the mortgage bond became subject to the lease of thethird defendant appellant. The fact that first and second defendants’interest under the* partition was sold under a Fiscal’s sale and boughtby the third defendant on July 20, 1929, during the pendency of thisaction but long after its institution on May 9, 1928, does not affect theposition, because this case has to be decided as to the rights of the partiesat the date of this action. Moreover, there is a definite issue (No. 4) on thepoint and no question of merger was raised on the issues. As a matterof fact issue No. 8 which was suggested by plaintiff’s counsel was framedso as to exclude the appellant’s Fiscal transfer from consideration in thiscase.
It follows from what I have said that the appellant must succeed inthis appeal, but as a reference was made to the cases bearing on the pointand respondent’s counsel argued that on those decisions the plaintiff’smortgage must be regarded as a right which vested at the date of themortage, and therefore must have priority over the later lease, I willstate here briefly the real effect of these judgments. As a matter of factas I have already said the mortgage was of the share which would beallotted by the partition decree to the first and second defendants,which can only mean a mortgage over the actual rights in the shareallotted to the first and second defendants to which they would be entitledto as a result of the partition decree. In other words the plaintiff’smortgage would be over the share allotted to the first and second defen-dants with all the obligations, rights, and duties imposed on the shareby the Partition Ordinance. If there was a servitude imposed on theshare so allotted the mortgage will be subject to the servitude. Similarlyhere it will be subject to the lease, as a result of section 13.
The earliest case on the point seems to be that of lauis Appuhami v.Punchi Baba‘. That was a case where the plaintiff sought to enforcea mortgage given to him by the defendant in respect of a divided portionof land which was a part of a larger land, the subject of a partition suit.The mortgage was executed after the decree for sale in the partitionaction but before the certificate of sale was' issued. The Chief Justiceheld that the mortgage was valid as it was after the decree for sale.
1 23 N. L. R. 212.3 13 C. L. Rec. 121.
3 23 N. L. R. 415.' 10 -V. L. R. 19G.
AKBAR S.P.J.—Murugappa Chetty v. Alpisingho.
The Chief Justice also held that section 17 did not affect a sale or mortgageexecuted during the pendency of a partition case in respect of a share orinterest to which a person may become entitled after the partition suithad terminated. Mr. Justice Moncrieff agreed with this part of the ChiefJustice’s judgment. In Subaseris v. Prolis', Wood Renton A.C.J. heldthat a deed of sale conveying the vendor’s share which he would beentitled to either in common or partition, after interlocutory decree butbefore final decree, was not rendered void by section 17 as that sectiononly prohibited the alienation of undivided interests or shares in propertypending partition proceedings.
This was the only question argued and if I may say so with respect Iam in full accord with the Chief Justice’s judgment. The point that wasraised in the later cases of Perera v. Alvis" and Appuhamy v. BabunAppu1 * 3 was not argued before Wood Renton A.C.J. in Subaseris v. Prolis(supra) and in fact it did not arise in that case. In the two former casesthe Court held that section 17 would apply even when a defined lot wasconveyed or mortgaged pending partition proceedings if the vendor had,as a matter of fact, only an undivided interest or share in the dividedlot sold or mortgaged at the date of the deed of sale or mortgage. It willbe seen that these cases do not affect the mortgage before me, becausewhat was mortgaged was the share that the first and second defendantswould be entitled to. under the partition action.
In the Full Bench case Khan Bhai v. Perera 4, the point the Court diddecide was that the prohibition against alienation or hypothecation insection 17, where the Court decrees a sale, continued until the issue of thecertificate of sale under section 8 of the Partition Ordinance. As Maar-tensz J. pointed out in Fernando v. Atukorale “, the further expressionof opinion of the C.J. that “ persons desiring to charge or dispose of theirinterests in a property subject to a partition suit can only do so byexpressly charging or disposing of the interest to be ultimately allottedto them in the action ” was obiter. This expression of opinion can onlymean that section 17 would not affect a disposition drawn up in the termsmentioned and the learned Chief Justice did not mean to lay down allthe law on the subject.
In Appuhamy v. Babun Appu (supra), for instance, Ennis, Acting ChiefJustice, interpreted the remarks of Wood Renton A.C.J. in Subaseris v.Prolis (supra) in the sense in v/hich I have done. Lyall Grant J. inFernando v. Atukorale (supra) also came to the same conclusion.
Ennis A.C.J. and Lyall Grant J. construed the transfer of shares to beallotted under the partition decree pending the action as agreements totransfer.
There only remain two more cases to be mentioned and they areHewawasan v. Gunasekere6, which was unfortunately not cited at theargument of Fernando v. Atukorale (supra) and Rajapakse v. Dassanayake 7.In Hewawasan v. Gunasekere (supra) after interlocutory decree a
1 16 N. L. It. 393.
1 17 N. L. R. 135.
3 25 N. L. R. 370.
■ 27 X. L. R. 509.
1 26 N. L. R. 204.5 28 N. L. R. 292.• 28 N. L. R. 33.
KOCH J.—Murugappa Chetty v. Alpisingho.
commission was issued to survey, and a survey was made by which itwas proposed to allot certain lots to the defendant in the final decree.Before final decree was entered by which these same lots were allotted thedefendant transferred these lots to the plaintiff with an undertaking toexecute any further deeds, &c., which may be necessary to assure moreperfectly the premises to the purchaser. Garvin and Dalton JJ.(Jayawardene J., dissenting) held that the transaction was not obnoxiousto section 17 and effect could be given to it as between the parties.Dalton J. held further that on the doctrine of the exceptio rei venditae ettraditae the title to the lots vested in the purchaser. It will be seen fromthe remarks of Lord Phillimore in Gunatilleke v. Fernando1 that underthis exceptio it was the purchaser who had got possession of the landsold, either actual physical possession or symbolical, who could relyupon a title subsequently acquired by the vendor, not only against thevendor but against any one claiming from the vendor.
In the case of Hewawasan v. Gunasekere (supra), as the share sold wasa defined specific lot, possession was possible. But if the sale had beenof whatever share the vendor may be declared entitled under the partitiondecree, possession of that problematic share would not have been possibleand the doctrine of the exceptio would seem to be inapplicable. Thisdoctrine would only apply to sales and not mortgages.
In Fernando v. Atukorale (supra), the decision of the Supreme Court inHewawasan v. Gunasekere (supra) is not referred to, but Lyall Grant J.held that a sale of shares to be allotted in the partition action pendingthe action although not obnoxious to section 17 would be no more thanan agreement to sell. Maartensz J. held that section 9 of OrdinanceNo. 10 of 1863 wiped out such a sale. One difference between these twocases was that in 28 N. L>. R. 33 it was an action between the partiesto the contract whereas in the other case, the contest was between athird party and the vendor. In Rajapakse v. Dassanayake (supra) theSupreme Court held that a deed of sale of whatever lot or lots the vendorwould be entitled to under the partition decree pending the action wasnot obnoxious to section 17 and it was a case between the vendor andvendee. It will thus be seen that the principles of law on which I havecome to the conclusion that the third defendant-appellant is entitled tosucceed in this appeal are in no way inconsistent with the decisionson the point. Indeed, if effect is given to those decisions in which it washeld that a mortgage of this kind would be nothing more than an agree-ment to mortgage, this will be an added reason why the appellant shouldsucceed in this case.
The appeal is allowed with costs in this Court and the Court below.
The facts are briefly and concisely set out in my brother’s judgment.The one point to be decided on this appeal is whether the mortgagee’srights on a bond that was executed by the first and second defendants
1 22 N. L. if. 385.
KOCH J.—Murugappa Chetty v. Alpisingho.
take priority over the lessee’s rights on a lease that was subsequentlyexecuted by the same executants. Both transactions took place duringthe pendency of partition proceedings that were instituted in respect ofa land of which the first and second defendants were co-owners and whichproceedings terminated in a final decree. On a careful perusal of thePartition Ordinance, No. 10 of 1863, and after giving effect to the con-nection between the various sections, it will be generally seen that while theunqualified mortgage of immediate undivided interests executed by aco-owner during the pendency of proceedings under the Ordinance isnull and void, a lease, on the other hand, executed under similar conditionsis effective, provided such lease is considered not to be an alienation ascontemplated by section 17. I agree with my brother’s view that section12 read in conjunction with section 17 refers only to such mortgages ashave been executed prior to the institution of a partition action, and I amof opinion that by reason of the peculiar wording of section 13 a leaseby a co-owner can effectively be made during partition proceedings.There is, in addition, judicial precedent in favour of the validity of sucha lease for the reason that leases cannot be regarded as alienations undersection 17. (Kirihamy v. Mudiyanse1 and Appuhamy v. Nonis2.) If thena mortgage executed during partition proceedings is to be valid, it mustbe something different in type and nature from that contemplated insection 17.
The mortgage in question is not of presently existing undivided interestsbut of such interests that the mortgagor may be declared entitled tounder the final decree for partition or sale. The bond of mortgagetherefore comes to be imposed on the interests dealt with only at themoment when final decree is entered and not till then. Till such time,there is only a contract to secure a mortgage of such interests. Anyattempt on the part of the mortgagee to differentiate his position fromwhat I have stated, is to bring him closer within the ban that is set outin section 17 and to render his claim unrecognizable in law. The moresubstantiality he claims for the contract in his favour, the nearer hebrings that contract within the prohibition prescribed in section 17 andthe more he identifies his interests with those contemplated under thatsection.
I cannot help but feel that the various decisions my brother has referredto, which recognize the validity of a mortgage such as the present mortgageeholds, proceed on the view I have taken. I therefore agree with mybrother that the mortgage in favour of the respondent is subject to thelease in favour of the third defendant-appellant.
It is needless for me to refer in detail to the many authorities that havebeen cited to us in the course of the argument, as my brother has discussedthem fully.
The appeal must be allowed with costs in both Courts.
i 23 N. L. R. 272.
* 23 N. L. R. 415.
MURUGAPPA CHETTY v. ALPISINGHO et al