033-NLR-NLR-V-10-MUTTIHA-CHETTY-v.-DON-MARTINES.pdf
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Prese7it: Mr. Justice Wendt and Mr. Justice Middleton.kUTTIAH CHETTY v. DON MABTINES.
Wijesekere Appuhami et al., Claimants.
C. B. Hatton, 4,773.
Mortgage of movables—Sale of mortgaged property by unsecured creditor—Proceeds of pale—Pre/ererure—4 bsence of mortgagedecree—Roman-
Dutch Law—Civil Procedure Code, ss, 4, 282, and 352.
A mortgagee' of movable property hypothecated by an instrumentin writing duly registered, without delivery of possession, is entitledto preference in' respect of the proceeds sale, where such propertyis sold in execution at the instance of an unsecured creditor; and inorder to claim such preference it is not necessary that he shouldhave obtained a decree on the bond.
i
fjj HE facto are fully stated in the judgment of Wendt J.
Bawa, for the claimants, appellants.'
Sampfiyo, for the plaintiff, respondent.
Cur. adv. vult
1904.
January
15-
1004.
January 15.
C 176 )
16th January, 1904. Wendt J.—
The question raised upon this appeal is whether the appellants,the mortgagees, without possession, of certain movable property,are entitled to be paid the proceeds sale of that property in prefer-ence to the plaintiff, who procured the sale in execution of hisdecree in the present action on an unsecured debt. The appellants'mortgage was created by an instrument in writing dated- September1902, and duly registered. The property consisted of certain shopgoods, and the mortgagor, the defendant in the action, remainedin possession of them. The transaction was in fact what would beknown in England as a bill of sale. Plaintiff’s decree was dated19th June, 1903, and the sale took place on 6th July following.
On 9th July the appellants presented a petition in which the plaintiffand defendant were named as respondents; and which was supportedby affidavit. Their prayer was that out of the proceeds sale asum of Rs. 278.40, representing the price of goods comprised inthe mortgage, be paid, out to them in preference to plaintiff. Theyalleged that they were unaware of the proceedings in the actionuntil 26th June, when it vfas impossible for. them to sue upon theirbond and obtain a decree before the proceeds sale should be drawnby the plaintiff.
The Commissioner held that a decree was essential before amortgagee could claim the proceeds sale of his security, andthereforedisallowed the application. The mortgagees have
appealed.
It was admitted on behalf of the appellants that in every casehitherto ""decided in favour of the mortgagees’ pre.ferent right tothe sale proceeds he had held a decree, but it was submitted thatthis was an accident, and that the Court had never laid it downthat a decree was a condition precedent to the enforcement of theright.; It is certain that prior to the enactment of the Code of CivilProcedure no decree was necessary in the case either of a securedor of an unsecured creditor, before preference er concurrence, asthe case might be, was allowed in competition for a fund in medio[see Sinnajmlle v. Tilliambalam (1), Ca&y Lebbe Marikar v.. Aydroos <Lcbbe Marikar (2)]. But section 352 of the Code now requires everyunsecured creditor at least to hold a decree [Konamalai v. Siva- •kulanthu (3)], and the question is, whether that requirement appliesas well to debts secured on movable property. The section doesnot embrace mortgages of land, because the land continues subjectto the incumbrance notwithstanding the sale, and in such eventthe proviso debars recourse to the sale proceeds. So far as thisproviso goes it was held inMeeraSaibo.v.Muttu Chetty (4)—and
Ithinkrightly held—thatamortgageover movablesis1 notan
(1878) 2 S. C. C. 5.(3)(1891) 9 S. C.C. 203.
(1890) 1 C. U R. 1.(4)(1893) 3 C. L.R. 37.
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incumbrance which continues to attach to the property after its 1904.sale, so that that proviso in itself will not debar the mortgagee from January 16.-claiming the proceeds.-Wkndt J.
What are the rights of a mortgagee of movable property whichthe debtor retains in his own possession? He has the right of suinghjs mortgagor and bringing the properly to sale if it still remainsthe property of his debtor. When so sold he will rank preferentiallyon the proceeds. If, however, the goods have been sold by thedebtor, he cannot follow them in the hands of the purchaser.
Nor can he prevent such sale, which is within the rights of everymortgagor under the Boman-Dutch Law. Neither can he preventthe seizure and sale by an unsecured creditor of the mortgagor[Wijeyewardene v. Maitland (1)]. His “ security ” would thereforedepend on his being able (as the mortgagee in Meet Saibo v. Muttu€hetty did) to obtain a decree on his mortgage and seize the proceedssale under section 232 before they were handed over by the Courtto the creditor who made the levy. Considering the short noticeof sale necessary in the case of movable property, and the improba-bility of the mortgagee receiving notice of the action or of theseizure, this means that in most cases the mortgagee’s security willbe gone before he knows anything about it. But to this it may beanswered that that is inseparable from the nature of the. security,and that it will be equally defeated by a private sale by the debtor.
It seems to me that the point before us is completely covered byauthority. In Meera Saibu v. Muttu Ghetty Withers J.. pointedout that Konamalai v. Sivykulantha was an authority for insistingon decrees in the case of unsecured claims only, and he gave prefer-ence to a mortgagee of movables who had obtained his decree afterthe assets had been realized. In Vellaiappa Ghetty v. Pitcha Mania(2) the mortgagee had a decree of the Colombo District Court, but.he had not applied for execution to the Kurunegala Court, whichheld the assets, and this (it was argued) on the strength of Kona- .malai v. Sivakulantha deprived him of recourse to the proceeds.
But Bonser C.J.*and Withers J. held that section 352 of the Codewas limited to the case of unsecured claimants, and that the caseof a mortgagee was a casus omissus to which, in accordance withsection 4 of the Code, the old law must still be applied. The.following cases came under the consideration of this Court .in therecent case of Raheem v. Yoosoof Lebbe (3); when Layard C.J.summed up their effect as follows:“ The law, as laid down by the
above-cited cases, appears to be that section 352 only affects^cases where*there is competition between holders of ordinary moneydecrees, and that sections 232' and 352 read together indicate theintention of the Legislature to preserve the preferential, right ofspecial mortgagees/*
#(1) (1893) 3 C. L. R. 7.(2) (1899) 4 N. L. R. 311.
(1902) 6 N. L. R. 169.
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1904. For myself I agree in this view, and. it follows that the appellantsJanuary 15. were entitled to be paid in manner claimed by them. 1 understand,WbnotJ. however, that in claiming Bs. 278.40 they are seeking to avoidcontributing to the cost of realization. That is not equitable.They must bear their due proportion of that cost.
The appellants will have the costs of the appeal as well as of thecontention in the Court below.
Middleton J.—I agree.
Appeal allowed*
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