123-NLR-NLR-V-58-S.-SALISHAMY-Appellant-and-W.-SALISHAMY-et-al.-Respondents.pdf
1956 Present : H. N. G. Fernando, J., and T. S. Fernando, J.
S. SAIvISHAJiy, Appellant, mid W. SALISHAMYel al., Respondents
S. C. 115—D. C. Kalutara, 27,830
Estoppel—Sale of mortgaged property—Bids made by mortgagee—mortgagee's right toenforce bond subsequently—Partition Ordinance, a. 12—Evidence Ordinance,s. US.
Where a mortgaged land was put up for salo undor n partition dccreo and thomortgagee, who was not a party to tho action, mndo bids nt tho sale—
Held, that tho making of bids by tho mortgagee did not constitute an unequi-vocal representation by him that the land was not subject to a mortgage. Thomortgagee, therefore, was not estopped by section 115 of tho EvidenceOrdinance from enforcing his niorfgngo bond subsequently.
A
-xT-LPPjEAL from a judgment of the District Court, Kalutara.
Gooneralne, for the plaintiff-appellant-.
B. S. Dias, for the defendants-respondents.
Cur. adv. vult.
{1913) 10 N. L. It. 438. ■
June IS, 1956. H. N. G. Feexaxdo, J.—
The plaintiff-appellant Avas the mortgagee of two lands under a Bonddated April 23rd, 1915, which according to tho plaint was duly registered.In April, 1950, ho instituted this action for tho recovery of the principaland intei'est duo on tho bond as well as for a hypothecary decree in respectof the two lands, joining as parties tho two mortgagors, and also (forreasons which will presently appear) two other persons as the 3rd andtho 4th defendants. The mortgagors did not contest tho action and amoney decree was entered against them. This appeal is only against therefusal of the District Judge to grant a hypothecary decree.
The first of tho two mortgaged lands was the subject of a partitionaction D. C. Kalutara Xo. 26367 instituted by one of tho mortgagorsafter the execution of the mortgage bond. The present plaint!IF wasnot made a party to that action and did not intervene. Decree wasentered for the sale of the land, and, in pursuance of a commission issuedby the Court on 20th July, 194S, the land, was sold by the Commissioneron 23rd October in that year by public auction and purchased by thepresent 3rd defendant, who obtained a certificate of sale on 21st March,1949. Tho 3rd defendant is joined in tho hypothecary action in viewof his purchase of the land.
At the trial (in tho Avoids of the learned District Judge) “ the mort-gage Avas admitted ” ; and since no issue was raised as to the validityof tho mortgage or the amount due thereunder or its due registration inorder to bind subsequent incumbrancers, it must be presumed that theadmission coA'ered all these matters. The only issuo tried Avas the onesuggested on behalf of the 3rd defendant:—“Is the plaintiff estoppedfrom enforcing his mortgage bond No. 32932 dated 23rd April, 1945 bytho sale of Wclawatte land No. 1 in tho schedule to the amended plaint ? ”.
It Avas clearly established by the evidence that the plaintiff Avas presentat the sale and that he made the third bid (Es. 450) at the auction. The3rd defendant commenced to bid thereafter and ultimately became thepurchaser at Rs. 770. Despite the evidence of the plaintiff and of theauctioneer that the plaintiff had informed persons present at the salethat the land Avas subject to the plaintiff’s mortgage, the learned Judgehas preferred to believe the e-idenco of the 3rd defendant to the effect,firstly that tho mortgage Avas never mentioned, and secondly that the 3rddefendant Avould not have purchased the land if ho had knoAvn of theplaintiff’s mortgage. I should add that tho plaintiff is the brother-in-lawof the original mortgagor. Upon these facts, tho learned Judgo formedthe conclusion that “ any reasonable person would take such conduct,tof the plaintiff) to mean that the plaintiff had no interest in the land ”and held against tho plaintiff on the issue of estoppel.
The question Avliether (to employ the language of section 115 of theEvidence Ordinance) “ a parson has by his declaration, act or omissionintentionally caused or permitted another to believe a thing to be trueand to act upon such belief ”, can rarely receive a summary answer such
as appears to have been given in this case ; and the Tine, though valid,distinctions which have been drawn in the decided eases show thatdifficult problems ariso upon pleas of estoppel". For exa in pie Theodor is deSilva v. Kalu Appu el al.1 which decided that a person who was the highestbidder at a Fiscal's sale, though ho did not- comply with the terms forcompleting Ills purchase, was not estopped from asserting his title againstt-ho person who was ultimately declared the purchaser at the sale, cannotbe readily reconciled with Tisschamy v. Perera 2 where the plaintiff washeld estopped from asserting title to a land on the ground that ho hadbeen a bidder at a Fiscal’s sale of the same land.
The provisions of section 115 of the Evidence Ordinance are in effecta codification of the English Law on the subject which is stated in generalform as follows :—“ Where one person (* the representor ’) has mado arejiresentation to another person (' the rcpresentec ’) in words, or by actsand conduct, or (being under a duty to the rcpresentec to speak or act)bjr silence or inaction, with tho intention (actual or presumptive), andwith the residt, of inducing the representee on the faith of such represen-tation to alter his position to his detriment, the representor, in any liti-gation which may afterwards take place between him and the rcpresentec,is estopped, as against the representee, from making, or attempting toestablish by evidence, any averment substantially at variance with hisformer representation, if the representee at tho proper time, and in theproper manner, objects thereto ”. (Spencer Bower on Estoppel byRepresentation p. 10). In the first place it has to bo established that-the act or omission relied upon was intentional, and it has been held in-,one of the leading cases (Freeman v. Cook) 3, per Baron Parke, that “ if_whatever a man’s real intention may be, ho so conducts himself that a,reasonable man would take the representation to bo true, and believothat it was meant that ho should act upon it, and did act upon it as true,tho party making tho .representation will be equally precluded fromcontesting its truth ; and conduct by negligence, wliero there is a dutycast upon, a person, by custom of trade or otherwise, to disclose the truth,may often have the like cffcc-t ”. The learned District Judge in this case-lias not found, and indeed upon t-ho evidence could scarcely have foundthat the plaintiff actually intended tho defendant to think ’that- therewas no mortgage in existence so that the ingredient of intention wouldnot be established unless it can be said that the plaintiff’s conduct wouldnecessarily lead a reasonable man to conclude that a mortgage wa-s notsubsisting.
– In regard to the fact that the plaintiff was a bidder at the Fiscal";;sale, what has now to be established in order to estop him from assert in 5;his mortgage is that tho making of bids by a mortgagee at a sale of t-h> :mortgaged lands constitutes an unequivocal representation that the Ian-.',is not subject to a mortgage. Ceylon cases such as those of Caruppt rChcily v. W ijcsir.glie 4 and Tissaha-tny v. Perera (supra) arc not directly i 1point, because there the rule of estoppel was applied against persons who
3 (ISIS) 2 Exch. G54.
■* (1010) 14 y. L. It. 152.
■asserted title and not morely encumbrances against purchasers at Fiscal’ssales. But even where a claim of title was subsequently sot up tho merefact that bids wore mado was not thought conclusive in Thcadoris deSilva v. Kalu Appn (supra). There, upon the facts it was held that thobids were made morely in order to buy up tho land and avoid future liti-gation and that the ultimate purchaser at tho Fiscal’s sale was not.provedto havo been induced to purchase by reason of the bids made by thoperson who subsequently set up title.
'More directly in point is the case of Tikiri v. Belinda where the plain-tifF was present at an execution sale hold under his own writ of a 4/Gthshare of the land and himself made bids. Upon these facts he was heldto be estopped from setting np a prior registered usufructuary mortgageof the entire land in his favour. A special feature of that case referredto by do Sampayo J. was that the plaintiff was himself a writ holderand was present at the sale in that capacity and as a bidder ”, and itwas held (apparently for the reason that he was a writ holder) that aduty lay on him to speak and to disclose the mortgage. On those groundsde Sampayo J. distinguished the ease from that of Gar up pen Chctly v.IVijesinghe (supra) which he had. earlier decided himself. In the decisionlast mentioned the same learned Judge observed that “ in the case of amortgagee or lessee the duty to notif3’ his right is less apparent seeingthat notwithstanding the mortgage or lease the land may still be sold ”.While therefore a person who himself has title may well have a duty eitherto warn or else not to mislead others to whom the land is being offeredfor sale, such a duty does not so clearly arise in the case of a person theexistence of whose interests would not prevent the passage of title toanother. In the present case the land was put up for sale under a par-tition decree and all the parties must be presumed to have been awareof the provisions of section. 12 of the Partition Ordinance which expresslypreserves the rights of a mortgagee of land which is the subject of thepartition or sale. In view of the provisions of that section and of the factthat acquisition by mortgagees of lands subject to their own mortgagesis not unusual (merger being a recognised legal form of the extinction ofmortgages), it cannot in my opinion be said that the conduct of the plain-tiff in bidding at the sale amounted to an unequivocal representation thatthere was no existing mortgage. If, as I think, the act of bidding does notwork an estoppel, still less can the failure of the plaintiff to disclose hismortgage prevent him from now asserting his interest. But it wouldperhaps bo useful to add a few observations on this matter as well.
Silence or inaction can only count as a representation if there is alegal duty (not merely moral or social) owed to a party to make thedisclosure, the omission of which is relied on to create the estoppel,(Spencer Bower p. 65 sec. 75). Baron Parke in Freeman v. Cooke (supra)observed that the omission to disclose will .only estop a person if “ thereis a duty cast on him by custom of trade or otherwise, to disclose thetruth ”. Many of the cases show that the rule of estoppel by silence oracquiescence is usually applicable when there is some dealing or trans-
action between the parties or where “a person stands by” and permitsanother to incur expenditure the benefit of which he subsequently seeksto keep for himself. Apart from such cases a person who has a title,right or claim, has a duty to disclose it to another who conducts himselfwith reference to the property in a manner inconsistent with that.title,right or claim. But where a land which is already subject to a mortgageis being sold to some third party, the acquisition of title by the third partyis not inconsistent with the interests of the mortgagee and thereforedoes not involve any such violation of the mortgagee’s rights as wouldrender any disclosure necessary..
For these reasons the provisions of section 115 of the Evidence Ordi-jianco are not in my opinion applicable in the circumstances of this case.'The ordinary principle that the plaintiff’s prior registered mortgage pre-vails over the subsequent Fiscal’s conveyance must therefore be applied.
To turn now to the plaintiff’s claim for a hypothecary decree in res-pect of the second, land. According to the pleadings the 1st defendantwho was the original mortgagee sold the second land to the 4th defendant.But it was also stated in the plaint that according to the Interlocutorydecree entered in Case No. 26520 D.C. Kalutara, the interests of the 1stdefendant in the second land are now described in the manner set out inthe second schedule to the plaint. The learned Judge found however thatthe description in the plaint of the second land was confusing ; and ahypothecary decree over the second land was denied to the plain tiff by theJudge on the ground tha-t there was no evidence before him of the con-version of the second land described in the mortgage bond into the landas described in the Interlocutory decree in Case No. 2C520. But it is byno means clear that any of tho defendants contested the right of the plain-tiff to the hypothecary decree. The 1st and 2nd defendants filed noanswer and were not represented at the trial. The 4th defendant also filedno answer but he was represented, and the proceedings of 9th November,1954, would seem to indicate that the mortgage was admitted by theparties who were represented at the trial and that tho only issue actuallyraised was the one with which I have already dealt.
The question whether the second land was correctly described in thoplaint or not, appears to have been raised for the first time by the learnedDistrict Judge in his judgment. ’ In these circumstances I think the dis-missal of the.plaintiff’s action in respect of the second land without hisbeing given any opportunity either to identify the land in respect ofwhich he claimed a decree or to lead evidence in support of his claim wasquite unjustified.
In the result the plaintiff’s appeal must succeed in regard to both lands.Hypothecary, decree' must be entered ifi his favour in respect of the landdescribed in schedule No. 1 in the amended schedule.to the plaint .which;is attached to the amended^ plaint marked “ C ”. . As to the secohcl land :'which is'described in schedule No 2 in the amended schedule to the plaint,the case is remitted to the District Court %Wth a direction that th'^plaintiffbe given'an opportunity to identify the land so described with the land
No. 2 described in the schedule to the mortgage bond PI, including*an opportunity to lead any further evidence considered necessary. Ifhe so identifies the land to the satisfaction of the District Judge, ahypothecary decree should be entered in theplamtiff’sfavourinrespectofthe second land as well. That part of the decree of the District Courtwhich dismisses the plaintiff’s action against the 3rd and 4th defendantsis set aside. The 3rd defendant will pay to the plaintiff the costs of theproceedings in the District Corirt and of this appeal.
T. S. Fehxasdo, J.—I agree.
Judgment set aside.