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Present: Ennis J. and Schneider A.J.
PERERA v. KAPURUHAMY.
388—D. C. Kurunegala, 7,967.
Mortgage—Address not registered by primary mortgagee or puisne encum-brancers—Chapter 46, Civil Procedure Code, 8.643, et seq.—Actionby primary mortgagee without making puisne encumbrancer aparty—Rights of purchaser under decree—Rights of puisneencumbrancer.
Where neither the primary mortgagee nor the puisne encum-brancers registered their addresses as required by chapter XLVI. ofthe Civil Procedure Code, and the primary mortgagee obtained a*decree against the mortgagor without making the puisne encum-brancer a party to the action, and the property was sold under thedecree.
Held, that the purchaser had a title free of all the puisne encum-brances.
The secondary mortgagee was entitled to have his aImthr satis*fied before other creditors from the proceeds of sale of the propertymortgaged after the primary mortgagee was paid. He was notentitled to be made a party to an action for the realization uponthe primary mortgage.
r |A5E facts appear from the judgment of the District Judge:—
The first defendant executed a primary mortgage of this land, infavour of one Thegis. He subsequently executed two mortgages infavour of the plaintiff. Thegis put his mortgage bond in suit against
the first defendant* and having obtained a decree against him had 1921.
the land mortgaged sold under the decree* The second added
defendant purchased the land at that sale. The plaintiff now brings thisPerera v.
mortgage action against the mortgagor and the purchaser under the Kapuruhomysale held under the decree obtained in the previous mortgage action.
I shall first of all dispose of the issues between the plaintiff andthe second defendant. The present plaintiff* although she has notadmittedly registered her address, is not bound by the decree obtainedin the previous case. For her ' to be bound* it must be shown that theprimary mortgagee had registered his address; bat there is no proof ofsuch registration of address. It is* however* unnecessary to labour thispoint* as Mr. Markus admitted that he cannot contend that tike previousdecree binds the plaintiff. But he argued that* in the first place* thesecond defendant stands in the shoes ot the primary mortgagee* and theprimary mortgagee’s .priority, which has not been lost by prior registra-tion of the bond now sued on* survives to the benefit of the seconddefendant* who is the purchaser under the decree obtained by theprimary mortgagee. The learned proctor quoted the case reported in16 N. L. 22. at page 289 in support of his argument. What was deridedthere was that the purchaser under a mortgage decree canthe
benefit of the prior registration of the mortgage bond on which thedecree was founded. The principle of law enunciated in that judgmentdoes not apply to the facts here. Here there is a competition betweenmortgage rights themselves. Moreover* I am bound to follow thejudgment pf the Supreme Court reported in 21 N. L. 22. at page 173.
The facts there were similar to the present facts. The facts are some-what complicated* but it is sufficient to say that it was held in thatcase that a prior mortgagee has no remedy against the purchaser fromthe secondary mortgagee* if he has not made the latter a party in themortgage action brought by him. In that case* as in tikis* neither partyhad registered his address.
Another point raised by Mr. Markus was that the plaintiff not havingregistered her address cannot succeed as against the second defendant*who can say to him: “You have joined me as a party on the footing thatI am a subsequent' purchaser. You have not registered your address.
Not having complied with the requirements of section 643 of the CivilProcedure Code you cannot Succeed.” But tikis defence also is coveredby authority. “ Even though a primary mortgagee may not haveregistered his address* still he may join the puisne encumbrancers asparties to the action (RamamUhan Chetty v. Casern (supra)), or givethem notion of the action (Rowel v. Jayawardena (supra)), as by doingsothe requirements of the law would be satisfied.” (Jayawardene'8Registration of Deeds, pp, 198 and 199.)
The result is that the plaintiff is entitled in this action to succeedagainst the second defendant also, and to obtain a hypothecary decreeagainst him.
The defence of the first defendant is indicated by the remarks madeby his proctor* Mr. Gomis, at the trial: “ I propose to call evidence toshow in what way the bond is-to be paid off ; the plaintiff was to payoff the primary mortgage debt* and I was to transfer the land to theplaintiff.” But this defence is not open to him* as he cannot be allowedto prove that the bond was to be discharged in some other way thanthat mentioned in the bond. It has not been shown how the firstdefendant can come under proviso (1), section 92, of the EvidenceOrdinance.
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1921.1 answer the issues thus :—
_ A 1 and 2. Not proved in view of the answer to third issue.
4 and 5. No.
Enter decree for the plaintiff as prayed, with costs.
Samaraurickreme (with him Cooray), for added defendant,appellant.
De Zoyea (with him Canakaratne), lor plaintiff, respondent.
Cm adv. vult.
July 22,1921. Schneider A.J.—
The defendant executed three mortgages, one in 1909 in favourof ThegisPerera, and the other two in 1913 in favour of the plaintiff.Upon the facta proved, the first must be regarded as a primary, andthe others as a secondary and a tertiary, mortgage, respectively.No one of the mortgagees registered an address under the provisionsof chapter XLV1. of the Civil Procedure Code. Thegis sued uponhis bond making the defendant his mortgagor only a party to theaotion. At the date of that action, by the facts upon which thetrial proceeded, it is not proved that the mortgages in favour of theplaintiff had been then created. But the trial of this action appearsto have proceeded upon the footing that they had been created,and I will, therefore, proceed upon that assumption. Thegisobtained a mortgage decree in his favour, and caused the propertymortgaged to be sold. It was purchased by the added defendant-appellant, who appears to have obtained a transfer in his favourin 1919. I say “ appears ” because the date of the transfer is givenin his answer as May 9, 1909, which is an impossible date. It wasregistered on July 8, 1919, the date, therefore, of the transfer wasprobably May, 1919. In this action the plaintiff originally sued,the defendant, his mortgagor, alone upon the mortgage bonds, butbefore trial added the appellant as a defendant, upon the allegationthat the appellant was a party in possession of the land mortgaged.
The appellant took no objection in the. lower Court to his beingadded as a party. On appeal that objection was taken. But, inmy opinion, it comes too late, and Itherefore decline to consider it.The appellant pleaded in his answer that when the land was sold inexecution under the decree upon the primary mortgage, he hadpurchased it, and that iheplaintiffwasnot entitled, therefore, to askfor a hypothecary decree in respect of the land. *
The learned District Judge, purporting to follow the case ofAppuhamy v. Naide,1 gave judgment for the plaintiff declaring the•land bound and executable for the satisfaction of the plaintiff’sclaim upon his bonds; From this the added defendant has appealed.
l(1919) 21 N. JU & 17$.
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I must confess I am unable to follow the reasoning of the learned 1921.District Judge. It is tantamount to this, that the plaintiff is not gc^^[)BBbound by the decree in the action by Thegis, but that as a result of A.J,that action the primary mortgage has vanished for some mysteriousreason, and the secondary and tertiary mortgages are still alive and Kapumhamyattach to the land. The case relied on by the District Judge hasno application. It is only ah authority for the proposition that aprimary mortgagee, who sued his mortgagor alone at a date whenthe mortgagor had sold his interests and a third party was inpossession of the property mortgaged, could not bring a subsequentaction upon his bond against the party in possession, and that theparty in possession was not bound by the decree against the mort-gagor alone. • I therefore fail to see how that case has any applicationto the present action. I have already dealt with the first contentionof the appellant over-ruling it. There remains the second. It isthis. Whena land subject to more than one mortgage is sold undera decree upon theprimary mortgage, title to it passes tothe purchaserfree of any secondary or any other subordinate mortgage. Theappellant’s title, therefore, to the land was free of the mortgages infavour of the plaintiff.
This contention is sound, and I would uphold it. The provisionsof chapter XLVL of the Code have no application in this case.
Its decision does not depend upon those provisions, but upon aconsideration of what are the rights of a secondary mortgage.
A secondary, mortgagee is one entitled to. have his claim satisfiedbefore other creditors from the proceeds of sale of the propertymortgaged after the primary mortgage is paid. He is hot entitledto be made a party to an action for realization upon the primarymortgage. He can only claim the proceeds of sale left over afterthe satisfaction of the decree upon the primary mortgage. Itfollows, therefore, that the title to a land sold in execution of thedecree upon a primary mortgage passes to the purchaser free of anyencumbrance created by a secondary mortgage or any such encum-brance. The added defendant-appellant therefore acquired titleto the land free of the encumbrances in favour of the plaintiff, notbecause the plaintiff is bound by the decree in favour of Thegis, butbecause a'Sale in execution under a decree upon a primary mortgageeshifts the right created by other mortgages from the land to theproceeds of sale left over after the satisfaction of the claim of theprimary mortgagee.
I would, therefore, allow the appeal, with costs, and direct thatthe decree be varied by eliminating therefrom that portion of itdeclaring that the land is to be sold for the satisfaction of thedecree.
Ennis J.—I agree.
PERERA v. KAPURAUHAMY