MUTTURAMEN v. MASSILAMANY

077-NLR-NLR-V-16-MUTTURAMEN-v.-MASSILAMANY.pdf


( 289 )
[Full Bench.]
Present: Lascelles C.J. and Wood Benton and Ennis JJ.
MUTTURAMEN v. MASSILAMANY.
331—D. C. Colombo, 34,176.Purchaser under mortgage decree—Registration of mortgage bond enuresto benefit of purchaser—Competition between purchaser and alessee of the mortgagor—Lease executed before mortgage, but regie-tered after—Is mortgagee bound to give notice to lessee under s. 643,Civil Procedure Code f
A leased his land to B by a deed dated 1905 and registered inFebruary, 1910. Thereafter A mortgaged his land to C by a bonddated 1907 and registered in the same year. Under 'the mortgagedecree obtained by C against A the land was purchased by D inApril, 1910. D obtained a Fiscal’s transfer on August 19, 1910,and registered it on the 25th of the same month.
Held, that B’s lease was void as against D, as the competitionwas between the lease and the mortgage and not between thelease and the Fiscal's transfer.
The prior registration of a mortgage bond enures to the benefitof the purchaser in execution of the mortgage decree.
The duty of a mortgagee under section €43 of the Civil ProcedureCode to notice subsequent incumbrances arises only when thelatter have notified their deeds to him in the manner provided bythe section.
A mortgagee is not bound to give notice of his action to a lessee,whose deed was executed before but registered after the executionand registration of the mortgage bond, as section 643. excludesinstruments the date of which is earlier than that of the mortgage.
Lascelles C.J.—The date of execution is the test of theapplicability of section 643, mid the section does not extend toinstruments which, if they con be described at all as subsequent.incumbrances, can only be described as such in a figurativesense on account of the artificial priority which the RegistrationOrdinance gives to a competing deed.
A PPEAL from* the judgment of the District Judge of Colombo,xl. The facts are fully set out in the judgment of the ChiefJustice.
This case w.as referred to a Bench of three Judges by LascellesC.J. and Wood Renton J. by the following judgments:—
March 5, 1913. Lascelles C.J.—
* The facts in this case are of the simplest character. -They are such.as must frequently occur in the course of everyday transactions;and it is surprising that our system of law should leave room forwell-founded- doubt. to the. rights of the parties.
Vol. XVI.10
19S3.
124-t-J.N.tfmcUM)
( 290 )
1018.
IiASQBLLKS
OJ.
Multuramenv. Mastoid-many
The joint owners of the property in question mortgaged it bybond dated October 11, 1907. The bond was registered three dayslater. The mortgagee put the bond in suit, and the premises weresold by the Fiscal and bought , by the plaintiff on April 11, 1910.The Fiscal's transfer was issued on August 19, 1910, and registeredon August 25 of the same year. The defendant claims possessionunder a lease from the joint owners dated June 25, 1905 (i.e., priorto the date of the mortgage), and registered on February 22, 1910.i.e., before the FiscaTs transfer..
The learned District Judge has declared that the plaintiff isentitled to the premises, but has dismissed his claim to possession.Ip. other words, he has held that the plaintiff’s purchase at theFiscal’s sale was subordinate to the defendant’s lease. Against thisdecision the present appeal has been filed.
At the outset it should be noticed that the decision of v&uLangenberg A.J. in Massilamany v. Santiago,1 though given on thesame facts, is not an adjudication of the question now at issue, noris it an authority for the decision of the learned District Judge inthis case. In that case the contest was between the present defend-ant as plaintiff and his own sub-tenant as defendant; and it wascontended by the latter that the present defendant’s title as lesseewas determined by the prior registration of the mortgage in favourof liamanathan Chetty. It was held, and, if I may respectfullysav so, rightly held, that, though the rights of the present defendant-may have been subordinated to those of the mortgagee, his titlewas not extinguished, because registration of the mortgage onlyaffected the priority inter se of the competing deeds, namely, themortgage bond and the lease, and did not avoid the title of thislessee as against his sub-tenant.
The decision of the learned District Judge, as I understand it,proceeded mainly on the ground that the plaintiff in this case mustbe considered to have derived his title from the Fiscal’s transferand not from the mortgage.
Before referring to the decisions on this point, I desire to considerthe matter, apart from authority, by tin j light of the'language ofsection 17 of the Land Registration Ordinance, 1891. The objectof ibis section was clearly to secure purchasers and mortgageeswho have duly registered these securities against unregistered priorincumbrances. If it be held that the purchaser under a mortgagedecree at a Fiscal’s sale derives title from the Fiscal’s sale andnot from the mortgage, the protection afforded, by the section isreduced to a shadow. The position will Be thus: the prior incum-brance, being registered subsequently to the mortgage bond, isadmitted to be void as against that instrument; but it is said that,inasmuch as the incumbrance was registered before the Fiscal’stransfer, the sale is subject to the incumbrance, and the purchaser
i (1911) 14 N. L.R.m.
( 291 )
buys subject thereto. The result is extraordinary. The mortgageemade his advance on the security of property which was free freon,any prior incumbrance. Yet, when the time comes to realize thesecurity, it is said that the property must be sold subject to anincumbrance which was void against the mortgage bond, with theresult that a mortgagee, who has duly registered his mortgage, maylose partly or altogether the value of his security. I cannot believethat this was intended. Section 17 enacts that an unregistereddeed shall be deemed void as against all parties claiming an adverseinterest thereto on valuable consideration by virtue of .any subse-quent deed which has been duly registered. The unregistered deedin the present case is of course the defendant’s lease. What is theregistered deed by virtue of which' an interest adverse to the lease isclaimed? Surely it is the mortgage bond, and not the Fiscal'stransfer. Taking the transactions in chronological order, it isclear that as soon as the mortgage bond was executed and registeredan interest adverse to the lessee was claimable under that instrument.The subsequent sale and conveyance by the Fiscal are merely stagesin the procedure by which the mortgagee is allowed by law to realizehis interest under the mortgage bohd.
The Fiscal’s transfer under a mortgage decree cannot, in myopinion, be regarded as a source of title. It is the formal instrumentlegalizing a sale under a mortgage decree which declares the pro-perty to he bound and executable in satisfaction of the mortgagebond. The mortgage bond, I should have thought, was the rootof the purchaser’s title.
It is, of course, true that a mortgage in Ceylon, unlike a mortgagein England, does not invest the mortgagee with a legal title to the pro-perty. But it, nevertheless, creates an interest in the land, and it isregistrable and entitled to priority under the Registration Ordinance.
So far I have considered this question apart from authority, andhave stated what appears to me to be the proper construction ofsection 17 of the Ordinance. But there is a considerable weight ofjudicial authority opposed to the view which commends itself to me.
In Lebbe et al. v. Siddik 1 my brother Wood Renton was of opinionthat the appellant’s title was derived from the Fiscal’s transfer andnot from the mortgage, and he considered that the weight of author-ity was opposed to the views expressed by Dias J.. in D.C. Galle,No. 52,692, and’’ C. R. Tangalla, No. 27,077. But I doubt whetherthis expression of opinion is much more than obiter, dictum, sincethe decision of the appeal really rested on the ground that thelessees had not been made parties to the mortgage decree.
In C. R. Balapitiya 2 Browne A.J. took the same view. He.referred to the contrary opinion expressed by Dias J. in D. C. Galle,No. 52,692, and C. R. Tangalla, No. 27,077, stating that he did notknow that the other Judges concurred in that view.
1 U90$) 8 Bal. 886.* (1889) 1. Br. App. B, xi.
IiABQBESaS
O.J.
MuUuramenp. Manila-many
1M8.
IiAflOKMiKfl
O.J.
MtUturamenv. Masstta-many
( 292 )
The case of Abeygoonewardene v_. Andris Appu,1 which was adecision of the Full Court, is a clear authority for the propositionthat the title of a purchaser under a mortgage decree does notrelate back, for purposes of priority under the Registration Ordi*nance, to the mortgage bond.
In the case of TJngo Appu v. Babuwe 2 the same proposition wasre-affirmed by the same Judges. Withers J. there stated thatMr. Dornhorst had invited him tp reconsider his ruling in Abey-goonewardene v. Andris Appu,1 and that he was willing to do sowhenever a proper case came before him on appeal.
The present condition of the law on this most important subjectappears to me so unsatisfactory that I would set the case down forre-argument before a Court of three Judges.
In view of the conclusion at which I have arrived on the principalpoint in the case, it is only necessary to refer shortly to the otherpoints on which the respondent relied.
The Registration Ordinance, it was argued, is concerned with thepriority of deeds; it does not invalidate the unregistered instrument;it merely postponed it to the registered instrument; the plaintiff,therefore, should be given possession of the premises, for to denyhim possession would be equivalent to cancelling the defendant'slease. It is, of course, quite true in a general sense that it is thepriority of deeds which is directly affected by the Ordinance. Butin some circumstances a declaration that one deed shall be con-sidered as subsequent in date to another comes to the same thingas a declaration that the first-named deed is to be treated as voidas against the latter. Section 17, after enacting that a priorunregistered instrument shall be deemed void .as against partiesclaiming an adverse interest under a subsequent registered instru-ment, goes on to mention the “ priority thereunder ” (t.e., underthe registered deed) and the M pirority hereby conferred-on-it.”Thus, the section treats the enactment that one' deed shall be deemedto be void as against parties claiming under another as the samething as an enactment that priority is conferred on the latter asagainst the former. The result is, I think, quite clear. In thepresent case, if the competition is between the defendant’s leaseand the mortgage bond, the lease, so far as it comes into conflictwith the plaintiff’s title under the mortgage bond, must be treatedas non-existent. But beyond this the lease is unaffected, and anyrights which may exist thereunder are enforceable so long .as theydo not conflict with the plaintiff’s title.
The respondent endeavoured to support thei judgment princi-pally on the ground of procedure. It was argued that therespondent should have been made a party to the mortgage, action,and that inasmuch as he was. not joined he is not bound by thedecree.
i(1894) 8 C. L. R. 7h
3 (2*&) 8 C. L, R. t$.
( 298 )
The argument is that, though the respondent, as regards the dateol his lease, is no* a subsequent incumbrancer, he must neverthelessbe treated as one, because by the operation ol the [RegistrationOrdinance his lease is postponed to the mortgage bond.
Now, whatever may be the merits of this argument, it is clear thatthe duty of the mortgagee, under section 648 of the Civil ProcedureCode, to notice subsequent incumbrancers arises only when the latterhave notified their deeds to him in the inanner provided by the section.
The foregoing are the views which I have formed at present;they may, of course, be modified when the case is argued before the•Collective Court.
1913.
XiASOELLBS
O.J.
Mutturamen0. Matsila-many
Wood Renton J.—
The plaintiff claims a declaration of title to the premises describedin the plaint under a Fiscal's transfer dated August 19, and regis-. tered on August 25, 1910. The premises were sold by the Fiscalin execution of a decree in an action by Mutturamen Chetty on amortgage bond. in his favour by the original owners,. John DomingoCasie Chetty and Anna Bridget Casie Chetty. The bond was datedOctober 11, and was registered on October 14, 1907. The defendant-respondent claims possession under a deed of lease by the originalowners above named dated June 26, 1905, and, registered onFebruary 22, 1910. The appellant’s contention is that the leaseis void as against the mortgage bond and in respect of all rightsderived under it by virtue of priority of registration. The appellantfurther argued that the respondent was estopped from relying onhis lease since he had signed as a witness to the bond, which describedthe premises as free from incumbrances. The learned DistrictJudge disposed of this latter contention summarily, and in myopinion quite correctly. Mutturamen Chetty gave evidence atthe trial, and admitted that he was .aware of tbe lease in favour ofthe respondent. It is obvious, as the learned District Judge pointsout, that under such circumstances no estoppel could arise.
The other points involved in the appeal are, however, moredifficult. They are raised by the following issues:—
Is the lease dated June 26, 1905, registered February 22, 1910,void as against mortgage bond dated October 11, 1907,registered on October 14, .1907, by reason of the priorregistration of the latter ?
The defendant not being made a party to the mortgage action,is he bound by the decree in the mortgage action andthe sale held thereunder?
The learned District Judge holds that the questions of lawraised by these issues are disposed of by the case of Massilamany v.Santiago ' I am unable to accept that view. The contest there was
* {1911) 14 N. L. R. m.
( im )1913.
fWoOB
BentonJ,
MuttunmenMaaaila-' many •
not between the lessee and a mortgagee, but between a lessee and hissub-tenant; and van Langenberg A.J. held, and rightly held, thatalthough the mortgage by virtue of its prior registration prevailedover the lease, the title of the lessee as against his sub-tenantremained unaffected. The effect of section 17 of the Land Regis-tration Ordinance, 1891, apart from the interminable series ofdecisions of which it has been the subject, is, I think, fairly clear.The instrument which acquires priority by registration pushes outof his way every competing unregistered instrument of prior datefor all purposes, but leaves: such instruments otherwise unaffected.There was no issue at the trial as to whether or not the provisionsof- sections 642 and 643 of the Civil Procedure Code were applicablein the present case, and I would not allow any such issue to beraised now.
The only remaining question is whether the title of the purchaser .at the Fiscal's sale dates from the Fiscal's transfer or from themortgage. In the case of Lebbe et aL v. Siddik,11 had no occasion toconsider, and’did,not consider, that question on its merits. I onlyheld, as I was Jx>und to hold sitting as a single Judge, that theweight of the existing judicial authority was against the viewexpressed by Dias J. in D. C, Galle, No. 52,692 (December 17, 1886),and C. R. Tangalla, No. 27,077,2 that in such a case the priority<of earlier registration of a; bond could be carried forward tp benefita decree on it or a purchase or transfer in execution of that decree.
I quite agree, however, that this question is one of serious importance,and that, having now been formally raised, it should, in view ofthe conflicting decisions, be referred; to the Collective Court. It isonly on that point, however, that any reference to the CollectiveCourt is necessary.
A St. V. J&yewardene, for the plaintiff, appellant—The plaintiff's'title is not subordinate to the defendant's lease. The lease wasregistered after the mortgage. The benefit of the prior registrationof the mortgage bond enures to the benefit of the purchaser underthe mortgage decree; The judgments by which this case wasreferred to the Full Bench decide the point in favour of theappellant.
De Sampayo, K.C., for the respondent.—The mortgage decree doesnot bind the defendant (the lessee), as he was not made a party tothe mortgage action. [Lascelles C.J.—That point was alreadydecided by us, and we did not reserve that for the consideration ofthe Full Bench.] I relied more on this point even at the original’argument. The defendant is a puisne incumbrancer, who shouldhave been noticed by. the plaintiff in the mortgage action if hedesired to get a decree binding on the defendant. Although the* (1906) 3 BaL 226.21 Br. App. B, it, and it>.
( 295 )
lease was executed before the mortgage, it has become a puisneincumbrance by reason of the fact that the.mortgage had gainedpriority by registration. [Lascelles C.J.—Section 643 of the CivilProcedure Code refers to incumbrances of a date subsequent tothat of the mortgage.] The lease in this case is a puisne incum-brance by virtue of the Begistration Ordinance. Section 643 didnot take into consideration this type of cases, But the words mayBe interpreted to cover these cases. Counsel cited Samsi Lebbe v.Fernando-1
Section 643 does not apply to this case. The case is governed bythe common law.
1M8.
Wooi>Ehntox J.
AftMurwnen.0. Massifamany
Jayewardene, in reply.
May 5, 1913. Lascelles C.J.—
This appeal, which was argued on February 25 before a Benchof two Judges, was set down for re-argument before a CollectiveCourt, in order to obtain an authoritative ruling on the questionwhich is principally involved in the appeal. The question may bethus stated in general terms—in a contest between a purchaserunder a mortgage decree* on the one hand, and a party claimingunder an instrument registered subsequently to the mortgage bondbut before the Fiscal’s conveyance on the other hand—should thefirst-named party be considered to claim his adverse interest byvirtue of the mortgage bond, or by virtue of the Fiscal’s conveyancein his favour?
The point is of considerable importance, as if it be held, in circum-stances such as. those which have arisen in the present case, thatthe purchaser’s title is in virtue of the Fiscal’s conveyance and notin virtue of thfe mortgage bond, the registration of a mortgage, sofar as the title of the purchaser at the execution, sale is concerned,will be of no avail,* and his purchase will be subject to the title ofthe opposing party, though the latter deed was registered after themortgage.
In my judgment at the first argument I set out at length myreasons for holding that the purchaser must be held, for the purposesof section 17 of the Land Registration Ordinance, 1891, to claimHis adverse interest under the mortgage bond, and that’ that instru-ment was the real and effective source of his title.
At the re-argument the respondent's counsel did not contest thisposition, but relied only on the point that the defendant should havebeen made a party to the mortgage decree. Although this matterwas not referred to:the Collective Court, I will shortly notice Mr., de ■Sampayo’s argument. It is true, ; it was Baid, that the defendantis not a puisne incumbrancer in the ordinary sense of the word,inasmuch as his lease was prior and not subsequent to the mortgage
H190Q8N.L. R. 59,
1M3.
IiAS0KLLE8
C.J.
Mutturameno. MassiUbmany
( 296 )
bond. But the effect of section 17 of the Land BegiBtration Ordi-nance, 1891, is to give the mortgage bond priority, and thus in effectto give the lease a secondary position. Hence it was ingeniouslyargued that the defendant, as lessee, should have been made aparty under section 648 of the Civil Procedure Code, and that nothaving been made a party he is not bound by the decree. * In myprevious judgment I mentioned one consideration which appearedto me to be fatal to the respondent's contention. I will now stateanother. The procedure for joining puisne incumbrancers asparties in mortgage actions is prescribed in sections 648 and 644of the Civil Procedure Code. The incumbrancers to whom this.procedure is applicable are clearly, designated in section 648. Theyare those “ whose deed of conveyance, mortgage, lease, or otherincumbrance shall be of date subsequent to that of the mortgageon which such action is brought." This language clearly excludesinstruments the date of. which ist earlier than that of the mortgage.The date of execution is the test of the applicability of the section,and the section does not extend to instruments which, if theycan be described at all as subsequent incumbrances, can only bedescribed a6 such in a figurative sense on account of the artificialpriority which the Registration Ordinance gives to a competingdeed.
The case of Samsi Lebbe v. Fernando 1 does not, I think, supportMr. de Sampayo's contention, as the decision there turned uponthe construction of the term “ mortgage decree," in a lease whichwas put in evidence in the case. The circumstance that the term" mortgage decree " was construed in that particular lease to meana decree binding on the lessee can hardly affect the general questionof law under consideration.
For the reasons given in my previous judgment, I am of opinionthat the decree should be modified (1) by adding a declaration thatthe plaintiff is entitled to possession of the premises, and an orderplacing him in possession; (2) by awarding the plaintiff Rs. 200, theagreed amount of compensation; and (8) damages at the agreedrate of Bs.< 70 a month. The plaintiff iB entitled to his costs hereand in the Court below.
Wood Benton J.—
I have fullystated thefactsofthiscase in my interlocutory'
judgment datedMarch 5, 1913, and thereis no need to repeat them.
Mr. de Sampayo* K.C., who appeared for the respondent, did notattempt to support the view taken by the majority of the Judgesin C. R. Balapitiya, 2,586,2 Dingiri Banda v. Muttu Carpen Chetty9*Abeygoonewardene v. Andris * and TJngu Appu v. Babuwe,* and now
* (1904) 6 N.L. R. 69.2 (1899) 1 Br. App. Bt zi.
*1899) 1 Bt. App. B, ®t.* (1894) 8 C. L. R. 71.
* (1894) 8 C. L. R. 76.
( 297 )
that we have the opportunity of deoiding the question, I am dearlyof opinion that the view expressed by Dias J. in the eases whichI have cited in my interlocutory judgment should prevail. Thatwas really the only point referred for consideration to three Judges.Mr. de Sampayo raised again, however, the contention which hepressed upon us at the original argument of the appeal, that thepriority conferred on the mortgage bond, by reason of its priorregistration, should not deprive the lessee, whose lease, by reasonof the prior registration of the bond, was postponed to tae bond, ofthe right to be joined as a party to the mortgage uotion undersections 642 and 648 of the Civil Procedure Code. I expressed anopinion adverse to this contention in my interlocutory judgment,and I adhere to wh.at I have there said on the subject. Mr. deSampayo relied on the case of Samsi Lebbe v. Fernando,1 in whichit was held, in the construction of a particular lease containing aclause stipulating for its determination upon the passing of a“ mortgage decree,” that the term “ mortgage decree ” must betaken to mean such a decree as may be obtained after the joinderof the lessee so that it might be binding upon him. I confess thatI should have felt disposed to construe the lease in question in adifferent sense. But in any case I do not think that the inter-pretation of a conventional provision of this description can beregarded as a safe guide to the construction of such an enactmentas section 17 of the Land Registration Ordinance, 1891.
I concur in the order proposed by my lord the Chief Justice.
1918.
WoodBbnton J.
MiMutamen*. tiastita-many
Ennis J.—
I concur, and would make the same order.
Appeal allowed.
> (190Q8N.L.R.69.