( Ml )[Full Bench.]
Present: Bertram C.J. and Ennis and De Sampayo JJ.PERIYANAYAQAMPXLLAI v. SILVA et al
350—D. C. Colombo, 54,431.
Payment—Debtor paying mortgagee before notice of assignment—Paymentby purchaser from mortgagor to mortgagee in ignorance of assign-ment—Is payment a discharge of the debt ?—Is hypothecary actionagainst purchaser only available under our law ?—Mortgagor mustbe sued along with the purchaser in one action—Money not recover-able without six months' notice—Action brought after three months'notice—Action withdrawn—Subsequent action after one year—Is action maintainable without fresh notice f
A mortgagor who in ignorance of the assignment of the bond ingood faith pays the assignor (mortgagee) is wholly discharged;not so if notice has been given him by the assignee not to paythe assignor. The above principle does not apply to the case ofpayment by a purchaser from the mortgagor. The purchaser musttake measures to satisfy himself that the person he pays is entitledto receive the money. Otherwise he paya^at his peril. It is im-material in such circumstances whether the assignee has or has notgiven notice to the original mortgagor.
The Roman-Dutch law allowed a personal action against themortgagor for the debt, and a separate hypothecary action againstany vendee of the mortgage property; the hypothecary actionwas available even without the personal action being brought atall. Under the Civil Procedure Code the mortgagor must bejoined as a defendant in one and the same action, and a decree forthe debt and for the sale of the mortgaged property must beobtained in such action.
It follows that unless a decree for the debt is obtained againstthe mortgagor, no hypothecary decree can go against the purchaser.
By the terms of a mortgage bon^d, a mortgagor undertook torepay on receipt of six months’ notice in writing. The plaintiffgave notice in September, 1918, and the action on the bond wasinstituted in November, 1918, before six months had elapsed.
The action was withdrawn, and a new notice was posted inMarch, 1919. But it did not reach the first defendant. A freshaction was instituted in December, 1919.
Held, by De Sampayo J., that with the termination of the firstaction the notice ceased to hfft-e any operation, and that a freshnotice was necessary before the second action.
By Bertram C.J.—The previous notice would have been goodfor the purpose of this action if the first defendant had received it.
( 482 )
1921. f| ^HE facts appear from the judgment.W. Jayawardena (with him E. Q. P. Jayatileke), iop appellant.E. W, Perera, for first defendant, respondent.
Hayley, for second defendant, respondent.
Cur. adv. vult.
August 2,1921, Bertram C.J.—
The question to be decided in this case is a simple one. What isthe position of the purchaser of a mortgaged property, who paysthe mortgage debt or part thereof to the original mortgagee withoutknowledge that the mortgage debt has been assigned ?
The law as to the position of a mortgagor so paying his mortgageeis well settled :—
“ Plane npstris moribus .circa cessas action?# magis placuit, jusomne cedentis cession? extinctum ease, nec amplius cedentem, sedsolum cessionarium, compellere posse debitorem invitum ad solu-tionem, licet necdum debitori denunciatio per ^cessionarium factasit, ne sohfat cedenti. Debitorem tamen cessionis ignarum bona fidesolventem cedenti, in totum liberari. Non item, si ei per cessionarium
jam fuerit denunciatum, ne solvat cedentiEt sibi
cessionarius imputare debeal, si ob neglectam ant dilatam denuncia-tonem in damno sit ”—Voet. XVIII., 4, 15.
“ Certainly according to our customary law on the subject of theassignment of actions, the opinion has prevailed that the wholetitle of the assignor is extinguished by the assignment, and that theassignor can no longer enforce payment of the debt; but that onlythe assignee can do so, even although notice has not yet been givenby the assignee to the debtor not to pay to the assignor; but,nevertheless, the debtor who is ignorant of the assignment in goodfaith pays the assignor is wholly discharged; not so if notice has beengiven him by the assignee not to pay the assignor ….The assignee has only himself to blame if through neglecting ordelaying to give' notice he incurs a loss.”
But what is, the position of the purchaser of mortgaged propertywho so pays the mortgage ? On this there is no authority. Thecase must, therefore, be settled on principle. The purchaser is inthe position of having paid the wrong person. The right to receivethe debt has wholly passed away from the mortgagee, and nowresides exclusively in the assignee. No notice is necessary to com-plete his title. It is no doubt true that the debtor who pays hisoriginal creditor without notice «of the assignment is discharged.This is on equitable grounds. Though notice to the mortgagor isnot necessary to complete assignee’s title, it is reasonable and rightthat he should notify to the debtor.that he has acquired the debt,
( 483 )
and call upon him ta.pay the 3eht to himself. But no suchobliga- 1921.
tion can be supposed to rest upon the assignee with respect to a
purchaser o&the mortgaged property! The assignee knows nothing oj,of any such purchase. The purchaser must take measures to satisfy——
himself that the person he pays is entitled to receive the money.
Otherwise he pays at his peril.«- 8%bm
It seems to me immaterial in such oircumstanoes whether theassignee has or has not given notice to the original mortgagor.
There is no certitude that any such notioe would be transmittedto the purchaser. The purchaser’s position cannot be affected bythe fact that a notice, which he never received, was in faot given tosomebody else.
In ordinary circumstances no difficulty arises, for on paying offthe mortgage the purchaser would naturally require delivery of themortgage bond. The danger arises, where, as here, the payment isonly a payment on account. In this case the purchaser, (or ratherthe purchaser’s husband) paid the original mortgagee, because hetrusted in his own brother, who was the mortgagee. He must sufferfor this natural, but misplaced, fraternal confidence. Had' he takenthe ordinary precaution of inspecting the register, he would haveseen that the assignment Was registered. He omitted to do so forthe same reason, and must suffer accordingly.
The learned District Judge, without further explaining himself,says that in law and equity the purchaser must have the benefit ofthe payment. I do not here follow him. So far as law is concerned,
– the purchaser has paid the wrong person ; as to equity, why shouldthe plaintiff suffer for not having notified a person of whose existencehe was unaware ?
The learned Judge finds that the payment was made in good faith.
There are certainly circumstances of suspicion in the case whichsugge^j; a contrary conclusion. In partioular the receipt given forthe payment by one brother to the other is So elaborate, and sopeculiarly phrased, as to inspire the feeling that something indirectis afoot. But it is not possible to translate the suspicion so inspiredinto a logical proposition. One is conscious of a suspicion, but thedifficulty is to define what one suspects. There is no doubt thatthe money was paid; there is- no donbt that another propertywas mortgaged to raise it; I do not feel justified, therefore, indisturbing the finding of the learned Judge that the payment wasbona fide.
So far as the legal aspect of the payment is concerned, this findingis immaterial. The purchaser having paid the wrong person, itdoes not matter whether the payment is bona fide or not. But ithas a bearing on another aspect of the case, which must now beconsidered.
According to the terms of the mortgage bond, six months’ notice inwriting was to be given of the calling in of the mortgage debt, The
learned Judge has held that the notice, though posted, did not.reach the mortgagor, as it was sent to a wrong address. He has,therefore, dismissed the action against the mortgagor and givenjudgment against the purchaser and her husband for Rs. 250, thebalance of the mortgage debt. This is clearly erroneous. A moneyjudgment cannot be given against a person who is subject only to ahypothecary obligation. The judgment against such a person mustbe for the sale of the mortgaged property. There is, however, no crossappeal against' this judgment, and Mr. Mayley (who appears for thepurchaser) admits he is bound by it. He raises, however, on thisappeal a point not raisedin the Court below. He maintains that, eventhough we hold that the payment of Rs. 750 does not discharge hisclient, no order can be made against his client for the sale of theproperty, inasmuch as no judgment has been recovered for themortgage debt. The Court by dismissing the action against themortgagor has declared the mortgage debt not recoverable in thisaction ; it cannot, therefore, direct a sale of the mortgaged propertyfor the discharge of this debt.
Mr. E. W. Jayawardene seeks to escape from this position bythe help of Ahamado Lebbe Markar v. Luis,1 and contends that hehas alternative remedies, pecuniary against the mortgagor andhypotheoary against the purchaser, and that he can pursue themindependently. The case of Supramaniam Chetty v. Weeresekera2and the cases therein discussed, and the terms of section 640 ofthe Civil Procedure Code, are fatal to him. These remedies mustnow be pursued in the same action, and the hypothecary order isdependent upon the recovery of a money judgment for the mortgagedebt.
It becomes therefore of the first importance to inquire whetherthe Judge's finding that the necessary notice never reached themortgagor must be upheld. If it is upheld, then, though theplaintiffis successful on the main point of law, this action, already twiceinstituted, must be dismissed, and must be instituted a third time,when the necessary notice has been duly served. As my brotherEnnis and I were not in accord on this question, we desired theassistance of our brother De Sampayo. We also incidentallyobtained his assistance on the point last mentioned.
The facts are briefly these : The purchaser was the sister of themortgagor, and was married to the brother of the mortgagee. Allof them lived for many years together at Welisara, where the mort-gagor was the village schoolmaster] About two years before actionbrought, he married, left the village, changed his occupation, andsettled down near Polgahawela as the conductor of an estate. Themortgaged, as the learned Judge believes, unknown to the family,assigned his mortgage to the plaintiff, who is a Chetty, and whenthis Chetty determined to put his bond in suit, his proctor addressed
1 (1880) 3 3. O. O. 99,»(1918) 20 N. L. B. 170.
( 485 )
a notice calling for the money .to the mortgagor, sending the letter
by registered post to the address mentioned in the 'mortgage bond, Bebxbam
namely, Welisara. The action was by mistake instituted before
the notice had expired, and accordingly proved abortive. But in Periyanaya-
fchat action the mortpgor appeared, and denied having received
the notice. Fresh notices Were accordingly issued, and a new action
commenced. These notices were not sent by registered post. The
proctor for the plaintiff, apprehending that acceptance might be
refused, obtained receipts from the letters and sent them by the
ordinary post. In spite of the fact that the mortgagor had given his
address as Polgahawela when he appeared in the previous action,
his letter was directed to Welisara (or more correctly Ragama,
which is the postal address of Welisara). The mortgagor denied
that he had received this letter also ; the learned Judge has accepted
his denial on the ground that the letter was in fact misdirected. He
overlooked the fact that even, although this notice may not have
reached the mortgagor, the previous notice would have been good
for the purpose of this action had be received it. He makes no
finding on this question. If we were considering the matter on
these facts alone, no doubt it would be open to the Court to presume
that either or both of these letters were delivered at thd house of the
purchaser and re-directed on to her brother’s address and were duly
received by him. The District Judge having made no finding with
respect to the first letter, no doubt we are free to express our own '
opinion in the matter. Further, it is possible to draw a distinction
between the two letters. The second letter was sent with two others
addressed to the purchaser and her husband. They would have
realized the nature of the letter addressed to the mortgagor, and if
they were minded to give trouble would have suppressed it. With
regard to the first letter, this was posted by itself. Plaintiff’s
proctor had not at that time heard of the purchase, and gave the
notice to the purchaser subsequently. There would he no likelihood
of any suppression of this first letter. But the real question is
whether we are to accept the view of the learned District Judge that
these people were acting bona fide. He saw and heard them, and
he has so found. I do not feel justified in disturbing that conclusion.
With regard to the second notice, the mortgagor denied that hereceived it, and the District Judge has believed him ; with regardto the first notice, he denied that he received that also. The learnedJudge has not expressed an opinion on this point, but if it hadoccurred to him to do so, I cannot hut believe that he would haveaccepted the denial in that case also. I am not prepared myself,therefore, to presume that either of these letters actually reached themortgagor, but as my brothers take a contrary view, the appealmust be allowed, with costs, both here and below. The moneydecree against the second and third defendants should be convertedinto the ordinary hypothecary order.
The undisputed f&ets in this ease are as follows :—
The first defendant borrowed Rs. 1,000 from Richard Rupesinghe,and by way of security executed a usufructuary mortgage of certainlands on December 2, 1915. The bond was only registered onDeoember 14,1915. By the terms of the bond, the first defendantundertook to repay the Rs. 1,000 “ on receipt of six months’ noticein writing.”
The first defendant was a schoolmaster, and lived in Welisara,near Rag&ma, with his sister, the second defendant, and her husband,the third defendant, who was a brother of Richard Rupesinghe, forseven or eight years.»*
* The brothers Rupesinghe both worked in the same office inColombo, and practically saw one another every day. RichardRupesinghe, in addition to his office work, ran a boutique, in connec-tion with whioh he got into debt with the plaintiff, to whom heassigned the mortgage on March 10, 1916. The assignment wasduly registered on March 23, 1916. Richard Rupesinghe was inpossession under his mortgage, and on assignment to the plaintiffa draft lease was drawn up, but not executed, under which RichardRupesinghe was to pay rent to the plaintiff.
On April 22, 1917, the first defendant conveyed to his sister, thesecond defendant, the mortgaged lands subject to the mortgage.With regard to this transaction the third defendant said in evidence :“ When the first defendant transferred the property to my wife Iagreed to pay all his debts, including the debt due on the pro-note.The consideration for the transfer was Rs. 1,500. I paid firstdefendant in money by cheque Rs. 500.” The promissory notereferred to in the evidence was one for Rs. 130 by first defendantin favour of Richard Rupesinghe.
About this time the first defendant left Welisara and took upwork as a conductor on an estate in Polgahawela.
On September 18, 1918, the proctor for the plaintiff posted aregistered letter (P 1) to the first defendant, addressed to Ragama,demanding the payment of Re. 1,000 within six months. RichardRupesinghe died on October 6, 1918. In November, 1918, beforethe six months had expired, the plaintiff filed an action against thethree defendants for the recovery of the Rs. 1,000 on the bond. OnJanuary 31, 1919, the first defendant, in support of an applicationfor time to file answer in the case, swore an affidavit, in which he saidhe had received the summons in the case on January 20. Later, theaotionwaswithdrawnwithleaveto theplaintiff to bring afresh action.
On March 21,1919, the proctorfor the plaintiff sent to each of thedefendants another letter demanding payment within six months.These letters were addressed to Welisara, and it is admitted thatthe second and third defendants duly received the letters addressedto them.
( 487 )
The present action was instituted on December 6, 1919. The 1$21.first defendant asserted that he had not received six months’ notice—^
to pay as required by the bond, and the second and third defendantsMnrJ*
asserted that they tad paid Bs. * 760 to Bichard Bupesinghe on Penyanayo*April 20, 1918.T8&?
The learned Judge found that the first defendant had not reoeivedthe notice F 4, but omitted to make any mention of the earliernotice P1. He also found that the second and third defendants hadpaid Bs. 760 to Bichard Bupesinghe in good faith. He accordinglydismissed the plaintiff’s action, and, holding that the plaintiff’shypothecary rights were not effected, he ordered payment by thesecond and third defendants of Bs. 260. The decree is a simplemoney decree.
The plaintiff appeals.
The learned Judge did not discuss the evidence in his judgment,and did not expressly disbelieve the plaintiff’s evidence, he seems tohave regarded both the plaintiff and the first and second defendantsas innocent parties.
With regard to the question as to whether the first defendantreoeived the six months’ notice, there is a strong presumption thatthe letters P1 and P 4 reached him. They were posted to the addressgiven in the bond, where the first defendant had lived for seven oreight years, and where his sister and brother-in-law still lived, andthey have not been returned through the dead letter office. Thesecond and third defendants admit receiving their copies of P 4,which were posted to them the same day. Moreover, it appearsthat they forwarded the summons in the earlier action to the firstdefendant, so it would seem that they were in the habit of receivingcommunications for the first defendant and sending them on to him.
The notice P 1 was sent in a registered letter. The first defendantin evidence did not expressly deny having received this notice, it isrecorded that he said “ I did not receive any notice of that action,”which is not a denial that he received the six months’ notice to pay.
He denied the receipt of any letter, of which B 4 was a copy. In thecircumstances, I am of opinion that he has not rebutted the presump*tion that he received the registered letter P 1. Further/I am ofopinion that the evidence shows that very little reliance can beplaced on the evidence of the first defendant and on the evidenceof the third defendant, so that I am not prepared to accept thefirst defendant’s word in rebuttal of the presumption that he hadreceived the second notice P 4. The case is full of fraud, evasion,and subterfuge. The execution of the receipt 3 D 1 by BichardBupesinghe was clearly fraudulent. The two brothers saw oneanother frequently as they worked in the* same' office. The thirddefendant says that his brother Bichard drew up this documentwhen the Bs. 750 was paid. The document recites by numberand date a deed which at the time had passed into the possession
( 488 )
1021. oi the plaintiff, and declares that Bichard Bnpesinghe has noEmns"jto property. It purports to transfer all his rights and,
. interests in the property to his sister, the second defendant, from
date, and adds that the deeds will be surrendered when thee. Sitoa Rs. 250 balanoe due on the mortgage is paid. I find it difficult tobelieve that the third defendant accepted a document of this tenorin good faith and without suspicion. It next appears that theplaintiff instituted his first aotion on the bond in November, 1918,i.e., while Riohard Rupesinghe was still alive. The third defendantsays that on receipt of the summons in the earlier case he went tothe plaintiff and told him about this payment to Riohard Rupesinghe,taking the receipt with him. Such conduct does not seem natural.The plaintiff’s story, on the other hand, is much more natural. Hesays that the third defendant told him of the second defendant’spurchase from the first defendant, and that he would pay the money.The plaintiff further says that when he threatened to sue, the twobrothers came to him and asked him not to sue, but to give them time,whioh he did, and that, after he had issued the first summons, thethird defendant came-to him and said, he would pay ftnd again askedhim not to sue. The plaintiff further gave evidence that the thirddefendant and the first defendant later oame and told him of RichardRupesinghe’s death and proposed a compromise. Of the twostories, the plaintiff’s is to be preferred. The second defendant, ifhe discovered Richard’s fraud for the first time on receipt of thesummons, and while; Richard was still alive, would be more likelyto go to Richard first than to go to the plaintiff with a disclosure ofRiohard’s fraudulent transaction. If the plaintiff’s evidence is to. be believed (it has not been expressly disbelieved by the learnedJudge, and it is more consistent with natural conduct), then itfollows that the second defendant’s evidence is false, and the allegedpayment-of Rs. -750 as a bona fide transaction is open to gravesuspicion, especially when we find other conduct by the thirddefendant open to suspicion. For instance, it appears that nosearch for incumbrances Was made when first defendant conveyedto the second defendant, and that the third defendant did notconsult a proctor in connection with the alleged transfer set up inthe document 3 D 1. Further, I find a difficulty in accepting thethird defendant’s story that he purchased the land from the firstdefendant for Rs. 1,500, paying Rs. 500 cash and agreeing to payoff aU the first defendant’s debts, which, so far as the evidence goes,amounted to Rs. 1,130 (i.e., Rs. 1,000 on the bond and Rs. 130 on apromissory note).
It would seem from the letter 3 D 2 of April 2,1918, from Richardto the third defendant, that Richard was trying to obtain money,and the mortgage bond 2 D 3 shows that the third defendant raisedRs. 750 upon the mortgage of some of his lands on April 17. It isthis money which the third defendant says was paid to Richard
( 489 )
on April 20. There is no explanation as to where the amountRs. 130 due on the promissory note came from. It is quite possiblethat the third defendant oame to'his brother’s assistance and lenthim money, but that the sum Was paid bona fide to redeem the mort-gage to that extent is rebutted by the evidence of the plaintiff, whichshows that the third defendant was aware of the assignment to theplaintiff, as he could not have failed to be had he taken the ordinarysteps, both on the purchase from the first defendant and on thealleged transfer to him of Richard’s rights in the land, The transla-tion with Richard is ooloured with fraud, and the third defendanthas not, in my opinion, established his bonafides. He paid the wrong. man in any event, and it was not a good payment to redeem themortgage. The plaintiff’s evidence shows that the first defendantknew of the assignment of the mortgage, and the defence that thedebt was not due because of the absence of six months’ notice ispurely technical.
I find, therefore, that the evidence does not support the learnedJudge’s finding of fact, and I would accordingly set aside the decreeand enter judgment for the plaintiff for the full sum claimed againstthe first defendant and the usual mortgage decree against the secondand third defendants. The plaintiff to have oosts, both on appealand in the Court below. The plaintiff’s right to claim mesne profitsis reserved, as was done in the Court below. On the points of lawin the case I agree with the Chief Justice.
De Sampayo J.—
I agree with the view taken by my brother Ennis as to the facts,and I think the findings of the District Judge that the first defendantdid not receive the notices sent by the plaintiff, and that the thirddefendant paid Rs. 750 to Richard Rupesinghe on account of themortgage bond, are against the weight of evidence, and cannot besupported. This being so, the plaintiff is entitled to judgment asclaimed. But it is desirable to express an opinion on one or twoquestions, for the consideration of which, as I understand the matter,the Full Bench was constituted.
Mr. E. W. Jayawardena, for the plaintiff, argued that the firstnotice (P 1) dated September 18, 1918, which was thet preliminaryto the institution of the first action, No. 51,896, should, at all events,be taken to have been served on the first defendant, and that onthat footing the present action was well brought. I do not agreewith this. Action No. 51,896 was instituted before the expirationof the six months mentioned in the notice, and had consequently tobe withdrawn. I think that with the termination jof that actionthe notice ceased to have any operation. The first defendantcannot, in the circumstances, be said to have any certain intimationthat the plaintiff required him any longer to pay the debt in terms of16*
( 490 )
1921. that notice, and I think it was necessary«fresh notice
— as the plaintiff in fact did.
s^pato There is no questipte that both the neffifrl W|16 friTCad on the
; second defendant, who purchased the mortgAj^pfopw^r from the
*ampiUaT first defendant subject to the mortgage,JayaPardene
v. Silva expressed himself as content to get a bypbthncny do#&Li againstthe second defendant alone. This would havp'feeen possible underthe Roman-Dutch law, which allowed a personal action Against themortgagor for the debt and a separate hypothecary potion againstany vendee of the mortgaged property, the latter being availableeven without the former being brought at all.' But Roman-Dutch law on this point has undergone a change by virtue of section640 of the Civil Procedure Code, and it has been held that after theCode came into operation the mortgagor must he , rejoined as adefendant in one and the same action, and that a decree for the defatand for the sale of the mortgaged property must be obtained in suchaction, Punchi Kira v. Sangu1 and Svppramaniam Chetty v. Wears-selcera.a It appears to follow that unless a decree for the debt isobtained against the first defendant, no hypothecary decree can goagainst the second defendant.
The remaining question is whether, if a payment of Rs. 750 wasmade to the mortgagee, Richard Rupesinghe, by the second defend-ant, ar. by the second defendant or by the third defendant on herbehalf, it was a good payment as against the plaintiff,'who obtainedan assignment of the mortgage bond previous to such payment.In the absence of any exptess authority to the contrary, I agreewith the reasoning of the Chief Justice on this point, and wouldheld that it wuuld have been a good payment, if it was in fact madewithorrt^OtidS:of:the assignment.
In the view Itafce of the facts, however, I think that the plaintiffshould have p do$re» against the first defendant for the full amount,and a hypofch£3gjiif *deeree against the second defendant for the saleof the mortgftged property.
1 (1900) 4 N. L. R. 42.
(191$) 20 N. L. B. 170.
PERIYANAYAGAMPILLAI v. SILVA et al