123-NLR-NLR-V-43-MUTTURAMAN-CHETTIAR-et-al.-v.-KUMARAPPA-CHETTIAR-et-al.pdf
1942
• Mutturaman Chettiar v. Kumarappa Chettiar.499
Present: Howard C.J. and de Kretser J.
MUTTURAMAN CHETTIAR et al. v. KUMARAPPACHETTIAR et al.
14—D. C. Kurunegala, No. 17,309.
Mortgage—Money lent by three persons-—Purchase of property by two mori- .gagees—Action on the bond by the third—Right of purchasers to claimconcurrence—Merger—Roman-Dutch haw.t
plaintiff and the second and third defendants lent the first defendantthe sum of Rs. 27,500 on a mortgage bond, plaintiff contributingRs. 10,000 and the second and third defendants Rs. 17,500. The bond',which authorized the obligees to sue jointly or severally for the amountsdue to them, contained the following clause : “ And it is futher agreedthat, in the event of the said security being realised and the proceedsof such realisation nofhethg" sufficient to satisfy the claims in full of thesaid obligees and their respective aforewritten, they shall be entitled toclaim pro rata only on such proceeds but nothing herein containedshall prevent the said obligees, respectively, from securing the whole ofany balance of their respective claims from him, the said obligor or his
500 DE KRETSER J.—Mutturaman Chettiar V. Kumarappa Chettiar.
aforewritten. ” The first defendant’s rights in the property mortgagedwere sold by the Fiscal under a money decree and purchased by thesecond and third defendants. Plaintiff brought the present action torecover a sum of Rs. 15,125 due to him on the bond and prayed for amortgage decree.
Held, that the second and third defendants were entitled to con-currence and, in case of deficiency, to share rateably in the proceedsto be obtained when the security was realized.
Purchase of mortgaged property by the mortgagee extinguishes thedebt by merger only when the persons claiming the rights of ownershipand mortgage are identical and their rights are co-extensive.
^^PPEAL from a judgment of the District Judge of Kurunegala.
H. V. Perera, K.C., and N. Nadar a] ah, K.C. (with them B. G. S.David), for second and third defendants, appellants.
N. E. Weerasooria, K.C. (with him L. A. Rajapakse), for plaintiff,respondent.
Cur. adv. vult.
July 22, 1942. de Kretseh J.—
Plaintiff and the second and third defendants lent the first defendantthe sum of Rs. 27,500 on a mortgage bond, plaintiff contributing Rs. 10,000and the second and third defendants Rs. 17,500. The bond authorizedthe obligees to sue jointly or separately for the amounts due to them,respectively, and then came the following clause: —“ And it is furtheragreed that, in the event of the said security being realized and theproceeds of such realisation not being sufficient to satisfy the claims infull of the said obligees and their respective aforewritten, they shall beentitled to claim pro rata only on such proceeds but nothing hereincontained shall prevent the said obligees, respectively, or their respectiveaforewritten from recovering the whole of any balance of their respectiveclaims from him, the said obligor or his aforewritten A’.
The first defendant’s rights in the property mortgaged were soldby the fiscal under a money decree and purchased by the second andthird defendants. Plaintiff brings this action setting out the detailsof the bond and alleging that a sum of Rs. 15,125 was due to him andpraying for a mortgage decree accordingly.
The second and third defendants claim concurrence and, in case ofdeficiency, to share rateably in the proceeds to be obtained when thesecurity is realised. Admittedly they have not been paid what theylent. Plaintiff denies their right to claim concurrence. , .
The relevant issues were—
Are the second and third defendants entitled to concurrence with
the plaintiffs in the event of a judicial sale of the mortgagedproperties ?
Do the rights of the second and third defendants on the bond
sued upon revive on a judicial sale ?
Can the second and third-defendants claim concurrence or a revival
of their rights on the mortgage bond inasmuch as they purchased'the mortgaged properties at the fiscal’s sale on P 1 while beingco-mortgagees with plaintiffs on the bond sued upon ?
DE KRETSER J.—Mutturaman Chettiar v. Kwnarappa Chettiar. 501
Did the mortgaged rights of the second and third defendants under
the bond sued upon become merged on their becoming purchaserson P 1 ?
If so, did the mortgage rights of the plaintiffs glso become merged ?
If so, do the mortgaged rights of the second and third defendants
on the bond revive in the event of a judicial sale of the mort-gaged properties at the instance of the plaintiffs ?
The trial Judge, in a brief judgment, held against the second and thirddefendants.
Three questions have been argued before us, viz.: —
Were the rights of the second and third defendants lost by merger ?
If so, do they revive now that plaintiff is seeking to sell the mort-
gaged property against them ?
Are the second and third defendants entitled to share rateably in
view of the clause quoted above ?
In my opinion, the case can be decided on the clause alone. It clearlyprovided that, in the event of the security being realized by one creditor,other creditors were to be entitled to concurrence. If both parties suedjointly the clause would not operate and it was clearly intended to coverthe case of one of the obligees suing. The mortgage being one andindivisible, the whole security would be realized. That security wasintended for both, and. so both were entitled to claim such sums as weredue to them, respectively. As I shall show presently, the clause wasunnecessary, for that would have been the legal result^ but it only servedto make the position clearer. It must be remembered that the principalobligation was one of loan and that the mortgage was only accessory.The clause refers only to the satisfaction of the claims and imposes nocondition that a claimant should continue to have in his favour theaccessory obligation.
ft must also be remembered that the agreement was between theobligees on the one side and the obligor on the other and was not anagreement between the obligees directly but it set out the agreementbetween them also, since they had to be agreed between themselvesbefore they could agree with the obligor. In fact, the agreement to shareconcurrently affected them chiefly. As, however, the obligor came in,the proviso protected them against any possible argument on his partthat they had to share rateably in the event of a deficiency and could notproceed against him by personal'action for any balance due.
It seems to me that it is not very important to decide whether whenone obligee sued he should ask for a hypothecary decree for the fullamount owing to the obligees or only for the amount due to him.There would be amounts due to each obligee, respectively, and thebond authorised them to sue. jointly for the amount so due orseparately for the amount so due. The security was to be realizedand the total amount due ought to be claimed and this is what,in my opinion, the parties agreed to. Apart from agreement that iswhat is usually done when joint creditors are concerned. If all will notagree to unite, then one of them sues, making' the others defendants,but he sues to recover the total’ amount due, restricting his own claim
502 DE KRETSER J.—Miitturaman Chettiar v. Kumarappa Chettiar.
to such amount as is due to him. In this case the plaintiff was entitledto sue alone and need not have invited the defendants to join him but,in my opinion, he should have stated their claim as he was seeking torealize the whole security. Had no question of merger arisen, undoubtedlyhe would have had to do this, for the second and third defendants couldnot sue to have the security realized a second time on a bond on whichthe creditors stood on an equal footing.
Voet (XX. 4. 8) makes the position plain. He says that if at the sametime one and the same thing has been mortgaged to several persons,a half share to one and a quarter to*another and so on, or even whenno mention has been made whether of the whole or of a share, each cansue for a share only whether contending among themselves or third-parties-possessors, and such share will be a half share if an equal sum wasdue to each or a rateable proportion if the debts were unequal in amount.If it has been mortgaged to them singulis in solidum (i.e., to each withan interest in every part of the whole), then each may sue a third-partv-possessor m solidum. “ As among themselves,” he says (I quote fromBerwick’s Translation), “ To be more plain, if the same thing has beenbound to each in its entirety, and if neither of the creditors has been paid,they take shares by concursus ; and so payment of the debt to each is to bemade pro rata from the price realized by the sale of the pledge ….But when one of them has been settled with by payment or otherwise,without sale of the pledge, the entire pledge remains bound to the other■ for his debt ”.
Faced with this statement of the law, Mr. Weerasooria sought refugein the word “ otherwise ” and argued that the mortgage having beenextinguished by merger that statement was in his favour. That is not so.Merger does not settle a debt except in the case when a debtor andcreditor become united in one person, both as regards the debt and itssecurity. There are more ways than one of settling a debt. It is theexistence of the debt that is emphasized. What Voet is making plainbeyond the possibility of a quibble is that when one creditor has beensatisfied, i.e., regarding his debt the other creditor still has a hypothecover the whole of the property hypothecated.
Passing on to consider the other *points, the first question is whetherthere was a merger in the sense in which the Roman-Dutch law under-stood it. The material regarding merger is rather meagre. The com-mentators deal chiefly with the simple case of the debt being extinguishedby the creditor and the debtor becoming one and the same person. Thewriters refer to the absurdity of a man selling his own property in orderto pay himself. But there is no absurdity in a man letting his propertybe sold for the joint benefit of himself and another, more especiallywhen he cannot help it being sold. In other words, before there can bea merger, the persons claiming rights of ownership and of mortgagemust be identical and their rights must be co-extensive. If A ownedproperty as executor and had mortgage rights personally, clearly therecould be no merger. If A, B, and C as one entity owned mortgage rightsand A owned the property, is the position similar, as Mr. Perera contended ?It would be different if there were two mortgages on the one bond. In
DE KRETSER J.—Mutturaman Chettiar v. Kumarappa Chettiar. 503
the present case plaintiff does not allege merger of the security to theextent of about 17/27th of the property and only seek to makeexecutable 10/27ths thereof.
Pothier, at page 425 of his treatise, deals with confusion or merger,He says—“ By confusion is meant the concurrence of two qualitiesin the same subject, which mutually destroy each other; ” at page 428—“ In order to induce a confusion of the debt, the characters, not_ only ofdebtor and creditor, but of sole debtor and sole creditor, must concur inthe same persons. If a person, who was only creditor for part, becomessole heir of the debtor, it is evident that the confusion and extinctioncan only take place with respect of the part for which he is creditor
In the case before us each of the creditors is creditor as to part onlyof the debt but the mortgage is in solidum.
Pothier explains why the debt is extinguished. He is dealing with thecase of the universal heir without benefit of inventory. In such a casethe qualities of debtor and creditor become united in the same personand the debt itself is extinguished ; a person cannot be his own creditor.We have the case of heirs dealt with in Dias v. de Silva 1 and it was thereheld that there was no merger in the case of heirs in Ceylon.
Pothier says—-at page 426 “ The acceptance of a succession upontrust, to render a specific account, does not induce any confusion, for it isone of the effects of the benefice d' inventaire that the beneficiary heirand the succession are regarded as different persons, and their respectiverights are not confounded.
On page 427, he says, dealing with the accessory obligation of suretyship,which would correspond to the security afforded by a mortgage: “Theextinction of the accessory obligation of the surety by confusion doesnot induce an extinction of the principal obligation, the reason beingthat the existence of the principal obligation does not depend upon thesubsistence of the accessory obligation." He is dealing with a simplecase of merger. He points out that merger is not the same as payment.
Van Leeuwen, in his commentary, deals very briefly with merger andthen only in relation to servitudes. In Chapter XIX., s. 6 and inChapter XXII., s. I he states the position that a person cannot besubject to a service to himself, and goes on to say : “ If, however, aperson become proprietor of two separate houses, one of which is subjectto some service, to the other, such service ceases as long as that personremains the proprietor thereof ; but if such houses be afterwards againsold separately, each house again acquires its former service.”
The Dutch commentators' do not entirely omit reference to theprinciples governing a case like the present. ‘ Voet (XX. 5.10, Berwick’sTranslation, p. 446) treats of the anterior and the posterior mortgagee.The anterior mortgagee has preference, and on his suing and havingthe property sold the purchaser obtains the property free of the posterioror secondary mortgagee. If the sale were under the secondary mortgagethe purchaser is liable to have the property sold by the anterior orprimary mortgagee. ^Suppose, however, the primary mortgagee buys theproperty privately. His mortgage is merged in 'his rights as owner and
' 39 X.L.R. 358.
504 DE KRETSER J.—Mutturaman Chettiar v. Kumarappa Chettiar.
the posterior mortgagee now seems to have his way clear. The line ofreasoning, however, seems to be—that is far too easy a way of enrichingyourself at another’s expense; the law does not allow that to be done;you two creditors and the mortgagor stood in a certain relationship toone another; if you wish to treat the anterior mortgagee as a strangerWho has purchased the property, then you must treat him as a strangerfor all purposes; then his mortgage is still in existence and he haspriority. This means that merger does not kill a mortgage but onlyobscures or submerges it in a greater right. Remove that greater rightand you see the mortgage again. It is there to be enforced, if and whennecessary. It is only when the debt is extinguished that there is truemerger.
Voet expressly exempts purchases at public auction. In XX. 5. 5.he had dealt with the mortgagee’s rights when he desired to enforce liis'bond and had stated that he could enforce those rights only through theintervention of the court by means of a judicial sale on order of court.
When such a sale takes place the purchaser, even if he be the anteriormortgagee himself, gets absolute title and the posterior creditor can nolonger follow the property. It is only when, the mortgagee purchasesprivately that there is any room for argument. But it is also true thata sale by public authority generally conferred absolute title and so aposterior creditor could not pursue the property, (vide Berwick ;pp. 287, 448.
I find filed in the record a copy of the judgment of this cofirt in D. C.Chilaw, No. 2,965 (S. C. M. 17th Feb., 1905). The principle upon whichthat judgment proceeded is helpful. There E had a primary and a tertiarymortgage and K a secondary mortgage. E sued on the tertiary bondand bought the property. His hypothec on the primary bond wasnow merged. K then put his bond in suit and L bought the property.Thereafter E put his primary bond in suit and seized the property inexecution of the decree in his favour. L claimed successfully and E.brought an action to have the order releasing the property from seizurecancelled. Moncrieff J., quoting Voet, held that E’s rights on theprimary mortgage had revived and that he was entitled to have theproperty sold. Layard C.J. agreed for the same reason and called E’stitle by purchase in the first action a revocable title and said that hisactual rights as mortgagee were in abeyance.
I do not think Mr. Weerasooria was really serious when he argued thatthere could' be no revival of the bond as such revival was byoperation of law and Ordinance No. 7 of 1840 stood in the way of thathappening. No new mortgage .was being created but an existing one wasbeing enforced in the existing circumstances. It seems to me that it isclear that the second and third defendants are entitled to concurrence.
I therefore allow the appeal and set aside the order made in the case.The second and third defendants will be declared entitled to concurrence,the amount due to them being calculated before decree is entered. Theyare entitled to the costs of appeal and of the trial in the District Court.
Howard C.J.—I agree.
Appeal allowed.