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SAMSI LEBBE ©. FERNANDO.
C., Colombo, 16,967.
iction by mortgagee to realize his mortgage over a property already leased—Stipulation in lease that the lease should terminate upon signing of mort-gage deeree-=-Necessity for joining lessee as party defendant in mortgagesuit—Meaning of “ mortgage decree. ”
Where a property has been leased to one party and then mortgaged toanother, end the mortgagee desires to realize his mortgage, it is necessaryto join the lessee as a party defendant in the mortgage suit, eventhough the lease stipulated for its determination upon the passing of amortgage decree.
“ Mortgage decree ” in such a case must be taken to mean such decreeas may be obtained after the joinder of the lessee, so that it may bebinding on him.
HE plaintiff in this case was the mortgagee, and the defendantsthe lessees, of a properly which belonged to one Periya-
tamby. The plaintiff prayed that the defendants be ejected fromthe premises leased. The lease preceded the mortgage, butcontained a stipulation that any mortgage subsequently' executedshould have precedence over the lease, and that the sale of thepremises should determine the lease.
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1904. In the hypothecary action which the plaintiff had broughtApril 22. against the mortgagor the lessees were not made parties. Thelessees refused to be bound by the mortgage decree and resisted .the present action in ejectment.
The District Judge held that, in view of the stipulationcontained in the lease, it was unnecessary to have made thelessees parties, and gave judgment for the plaintiff.
The defendants appealed.
The case came up for argument before Layard, C.J., andMonoreiff, J., on 15th March, 1904.
Domhorst, K.G. (with him Walter Pereira), for defendantsappellant contended that the lessees must have notice of the actionagainst the mortgagor. He cited Ellis v. Dias 5 N. L. R. 44.Ellis v. Careem, 5 N, L. R. 281; Issac Perera v. Baba Appu,3 N. Li. R. 48; Oriental Ban!: Corporation «. Boustead, 68. C. C. 1.
Sampayo, K.C. (with him F. M. de Saram), for plaintiff, res-pondent.—There is a stipulation in the lease, which makes. thelease to terminate when a decree is passed in an action to realize themortgage executed after the lease. Therefore, the joinder of thelessee as a party is unnecessary.
Cur. adv. vult.
22nd April, 1904. Layard, C.J.—
The District Judge’s judgment proceeds on the ground that itwas not necessary to make the defendants parties to the"'Tuitionbrought by the plaintiff on the mortgage bond. Now, thedefendants were the lessees of the plaintiff’s mortgagor on a leaseexecuted prior to the mortgage in favour of the plaintiff. Theauthorities cited before us- show that this Court has recognized thata lessee should be joined as a party, to the mortgage suit if the leasewas executed subsequent to the mortgage. 'This seems reasonable,as a lessee may have vested in him a term of ninety-nine years,and may desire to pay off the prior encumbrance so as to continuein possession until the end of his term. In this case, however,the lease was executed prior to the mortgage, but contained acondition that any mortgage subsequently executed should haveprecedence over the ^ease, and that the sale of the premises leasedunder such a mortgage should determine the lease. The DistrictJudge seems to think that in view of this condition dt wasunnecessary to. make the lessee a party, because he says the sale ofthe premises by the mortgagee under a mortgage decree according
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to that condition terminated the lease. The question i6, what did 1&04*
the parties mean by “ a mortgage decree,” and was the decree obtained April ii.
by the mortgagee without joining the lessee such a mortgage Layabd,C.J.
decree as was binding on him ? It appears to me that the parties
must have been taken to have contemplated such a “ mortgage
decree ” as was binding on the lessee by his being made a party to
the action, otherwise the lessor might create a fictitious mortgage
and allow his mortgagee to obtain a mortgage decree thereon, and
the lessee, according to the construction placed on the lease by the
District Judge, .would at once, on the decree being obtained, cease
to have any interest in the property leased tp him. ■ I cannot believe
that that could have been the intention of the parties to the lease.
From the seventh paragraph of the statement setting out the factsof the case it appears to me doubtful whether the Fiscal did sell tothe respondent anything more than the premises, subject to theexisting lease. fie appears to have seized and sold to the plaintiffthe premises leased, together with all the rents reserved andpayable to the mortgagee by virtue of the lease. There wouldhave been no necessity to assign the rents payable under the leaseto the plaintiff, if the Fiscal intended to sell the property free ofthe defendant’s leasehold interest.
I do not think the plaintiff is entitled to eject the defendantsfrom the premises leased,- and I would set aside the judgment ofthe District Judge and dismiss the plaintiff’s action with costs inboth Courts.
I am of the same opinion. I agree with the Chief Justice inthinking that Periyatamby’s lessees (that is, the defendants) shouldhave been made parties to the plaintiff’s mortgage action againstPeriyatamby. As they were not made parties, they occupy theposition of ordinary lessees whose lessor’s land has been seizedand sold in execution, and are not subject as regards the plaintiffto the special arrangements made between them and their lessorwith regard to a mortgage of the leased premises made subsequentlyto their lease.
SAMSI LEBBE v. FERNANDO