051-NLR-NLR-V-46-SARAM-Appellant-and-THIRUCHELVAM-Respondent.pdf
Sat am and Thiruehelvam.
146
1945Present: Keuneman, JayetUeke and Rose JJ.
SARAM, Appellant, and THIRUCHELVAM, Respondent.
73—D. C. Kegalla, 2J289.
Mortgage—Usufructuary mortgage in favour of A—Subsequent usufructuarymortgage in favour of B—Bight of subsequent mortgage to discharge theprevious mortgage.
L granted to the defendant a usufructuary mortgage bond in 1940and subsequently in 1942 granted another usufructuary mortgage bondto the plaintiff. Plaintiff brought the amount of- the earlier bond int,ocourt, not in the name of the debtor but in his own right as subsequentmortgagee, and asked for an order that the defendant should accept thesaid sum and give a discharge of the bond.
Held, that in the absence of proof that the prior mortgagee (thedefendant) had taken steps to enforce his rights the plaintiff was notentitled to redeem the mortgage granted to the defendant.
C
ASE referred to a Bench of three' Judges in terms of section 775 (1)of the Civil Procedure Code. The fact? appear from the
argument.
E. B. Wikremanayake (with him H. Samaranayake). for the plaintiff,appellant.—By deed of August 14, 1940 (D 2), one L granted a usufructuarymortgage to the defendant, and subsequently on October 8, 1942, gavea usufructuary mortgage (P 2) of the same property to the plaintiff.Plaintiff lias tendered to the defendant Rs. 625 in full payment of thedebt due under D 2 and asks in the present action that the bond D 2 bedischarged. He is entitled in law to succeed. A secondary mortgageecan in his own right discharge a prior mortgage and the prior mortgageeis under a legal duty to accept payment and discharge the bond. Thisview was accepted in Heema v. Punchibanda 1 although in that, case theperson who offered payment was the agent of the debtor. The plaintiffin the present ease can, although he does not have the authority of thedebtor, oblige the defendant who is the creditor to receive the paymentwhich he offers in the name of the debtor—Walter Pereira’s haws ofCeylon (2nd ed.) pp. 765, 534; Grotius Jurisprudence 2. 48. 43. (Lee’sTranslation p. 289) ; Wille’s Mortgage and Pledge in S. Africa (1920 ed.)pp. 269, 236.
[Jayetileke J.—Voet 20.4. 35 which is referred to in Nathan’s
Common Law of S. Africa, Vol. 2, Art. 1037A would appear to be againstyou.] The words “ in his name and on his behalf in Voet 20. 4. 35do not mean that the person who offers payment should have the authorityof the debtor. Pother’s Obligations 3. 1. 1 (463) (Evaris’ Translationp. 330) is directly in point.
N. Nadarajah, K.C. (with him H. W. Thambiah), for the defendant,respondent.—The defendant cannot be compelled to accept payment fromthe plaintiff unless the payment is made at the instance of the debtor ofunless he defendant has sought to enforce by action his rights under I) 2
1 (1921) 23 N. L. R. 95.
146
K_EUNEMAN J—Saram and Thirvchelvorm.
against the debtor—Sanmugam Chetty et al. v. Khan et al.1; Pothier’sObligations (Evans’ Translation pp. 328-332, particularly at p. 331);Rattaranhamy v. Appunaide et al.2; Grotius Jurisprudence (Lee'sTranslation p. 489, ss. 7, 8 and 10); Burge’s Colonial Law, Vol. 3, p. 316(1st ed.)
E. B. Wikremanaydke replied.
Cur. adv. vult.
March 5, 1945. KeuNeman J.—
This matter has been referred to this Bench of three Judges in terms ofsection 775 (1) of the Civil Procedure Code. One Liyanasekera grantedto the defendant a usufructuary mortgage bond-—D 2 of 1940-1—andsubsequently granted another usufructuary mortgage bond—P 2 of 1942—to the plaintiff. The plaintiff brought the amount of the earlier bondinto court and asked ,for an order that the defendant should accept thesaid sum and give a discharge of the bond. At the trial the followingissues were framed: —
As the plaintiff is only a mortgagee from the owner of the land,
is he entitled to maintain this action and obtain a discharge ofthe bond in favour of the defendant?
Did plaintiff tender the amount due on the bond in favour of
defendant prior to action?
The second issue is immaterial as the money was brought into courtwith the plaint. The District Judge answered the first issue against theplaintiff, who appeals from that judgment.
The two Ceylon cases cited at the hearing do not cover this point;Heema v. Punc-hibanda 3 and Rattaranhamy v. Appunaide *. In each ofthese cases the plaintiff had authority from the mortgagor to pay off theprior mortgage, and was acting as the agent of the mortgagor. In thepresent case Counsel for the plaintiff admitted that he could not maintainthe action as agent of the mortgagor, and that he did not come in in thatcapacity. Counsel claimed to maintain the action as mortgagee. Thequestion we have to consider is whether a subsequent mortgagee has theright to compel a prior mortgagee to accept payment of the amount dueto him and to give a discharge of his bond.
Voet in his Commentary on the Pandects deals with this matter. In20. 4. 5 he refers to the rights of persons in possession of pledges to payon action brought by another pledgee, and considers whether cession ofaction takes place under those circumstances. He admits that thematter is not quite clear, but argues as follows: —
" It cannot indeed be denied that a stranger who spontaneously(sponte sua—i.e., without being impelled by his own interest) offers topay another’s debt to a creditor on behalf of a debtor has no legal rightto have the obligation (i.e., the mortgage) transferred to him (by thecreditor whose claim he thus satisfies) …. but it is otherwisewhen one either in pursuance of a contract, as in the case of guaranty(constitutum) and suretyship, or under the apprehension of losing possession
1 (1906) 2 A. C. R. 10 at 12-13.* (1928) 30 N. L. R. 97.
3 23 N. L. R. 95.‘ 30 N. L. R. 97.
K EUNEMAN J.—Sat am and Thiruchelvam.
147
of any kind (more especially when an action has been commenced by thecreditor against him 'as the ‘ det.entor ’ of a pledge) ofiers payment to acreditor who is neither unwilling nor reluctant (to receive it) but is takingevery means of enforcing it, and in default of this is about to deprive himof the possession (Berwick's Voet p. 384.)
I have cited this passage in full because some reliance was placed uponit by Counsel for the appellant. But I do not think it covers the presentcase. Voet talks of a case “ where an action has been commenced by thecreditor ”, or else the creditor “ is taking every means of enforcing it,and in default of this is about to deprive him of the possession ", In thelatter case Voet also postulates that the creditor ” is neither unwilling norreluctant to receive itIn that case a person who is not a mere
■“ stranger ” may pay the debt and obtain cession of action.
See in this connection Sanmugam Ghetty v. Khan 1.“ Voet’s reasoning
shows that the condition of being sued by the creditor isessential to the right of a possessor to pay and claim cession ”.
Voet deals with the tender by a posterior to an anterior hypothecarycreditor in 20. 4. 34 & 35. The passages which are of importance are asfollows: —
“ 34. The second part of this title treats of those who succeedin the place of prior hypothecary creditors: as to which it should beknown that posterior hypothecary creditors could tender to a prior one,even against his will, what is due to him, and thus succeed in the placeof the prior mortgagee thus settled with, in respect both of principal andinterest, although the debtor was not a consenting party to suchsuccession ”.(Berwick’s Voet p. 428.)
In 35 Voet deals with the fact that these tenders had some ” inequity ”,and adds ” They were inequitable in this, that the anterior creditor wasdeprived of the benefit of a mortgage obtained (it might be) through thegreatest prudence and foresight as security for his loan and interest(i.e., by way of a convenient and prudent investment of his money: Tr.);and so the more fortunate he had been in providing himself with a suffi-cient hypothec the more liable was he to be thrust out of it by a tenderfrom a posterior creditor; his vigilance thus profiting not himself butothers. They were necessary however because the second creditor couldnot efficaciously sell the pledge against the will of the prior mortgageewithout first tendering to him payment of the debt. .. But as
by our usages the posterior creditor may rightly demand a solemn (i.e.,judicial) sale of the pledge against the will of the first, this right of tenderfails thus far, that it cannot be forced on an anterior unwilling creditorso as to transfer the right of preference in the pledge: though, for therest, it may be agreed between the first and second creditor,that the right to the debt, and equally the right of mortgage and ofpreference, should pass to him with whose money the hypothecarycreditor has been paid.” (Derwick p. 429.)
It is important to remember that in section 34 Voet is setting out thelaw as contained in Justinian’s Code and Digest, and his references are
1 A. C. R. 10 at 13.
KEUNEMAN J.—Saram anil Thiruchelvam.
118
to the Code and the Digest. In section 35 he sets out first the “ inequityin this, and also argueB that at that time there was a necessity so to-regard the law “ because the second creditor could not efficaciously sell thepledge against the will of the prior mortgagee without first tendering to-him payment of the debt This ground of “ necessity ” had ceaBed to-exist under the Roman-Dutch law, for “ by our usages ” the posteriormortgagee could demand a judicial sale of the pledge against the will ofthe first. Consequently the right of tender could ‘‘not be forced on ananterior unwilling purchaser, so as to transfer the right of preference in-the pledge But it was open to the second creditor “ by conventionto obtain a transfer of the rights of the prior creditor according to the-legal form.
The authority of Pother on Obligations has also been cited to us: Par-111. C. 1 Art. 1,463—464 (Evans’ Translation pp. 330,331). The followingpassages may be noted: —
•’ 463. It is not essential to the validity of the payment that it wasmade by the debtor or any person authorised by him; it may be madeby any person without such authority or even in opposition to his orders,provided it is made in his name and in his discharge, and the propertyis effectually transferred; it is a valid payment, it induces the extinction,of the obligation, and the debtor is discharged even against his will(The authority- cited for this is Gaius.) “ But if the payment was notmade in the name of the real debtor it- would not be valid.”
Later Pother (in 464) points out that no difficulty arises in this con-nection where the creditor has agreed to receive the payment, but thatthe authorities “ do not decide whether the creditor can or cannot beobliged to receive the payment ”. He then considers certain texts andcontinues—“ From these texts the rule may be inferred that any tendermade to the creditor by any person whatsoever in the name of the debtorwill be valid, and place the creditor en demeure, when the debtor has aninterest in the payment, so as to put an end to any action which thecreditor may have commenced, or to stop the accumulation of interest orto extinguish a right of hypothecation. But if the payment offered would'hot procure any “ advantage to the debtor, and would have no other-effect than to change his creditor, the offer ought not to be regarded ”.Here the right is given to any person interested in the payment to offer-to the prior mortgagee the amount of the debt and so to obtain an extin-guishment of the obligation. But two points may be noted in thisconnection: (1) that the offer of payment must be made in the name of thedebtor; (2) that the offer should not be regarded if it does not procureany advantage to the debtor, for instance if it has no other effect than tochange his creditor.
Reference has also been made to Grotius—Bk 2, ch 48, 43—(Maasdorp3rd Edn. p. 192).“ A later mortgage may tender to one who has prece-
dence payment of his claim, and thus step into his place by cession of'action.” It is sufficient to say that Grotius is not here dealing with theright of a posterior creditor to compel a prior creditor to receive payment..
KKl'XEMAN .T.—Samm and Thiruchelcam.
149
1 need only add in Schorer’s Notes on this section there is aireference to Voet 20. 4. 35. (Maasdrop 3rd. Edn. p. £46).
There is also a passage in Burge (1836 Edn. Vol. Ill p. 816) basedon the Digest. But Burge is not considering whether the creditorcan be compelled to accept the payment. “It (payment) may be made-fy any person without any authority from and even in opposition to the.orders of the debtor if it is made in the name of and in discharge ofhim”.
It may be argued that the passages in Voet and in Pothier are not-reconcilable. If this is so, I think we ought to rely on the authority ofVoet rather than of Pothier. But it is possible that in 20. 4. 35'Voet was in fact dealing with the cession of action, 'as distinct from theextinction of the debt, and that he said no more than that a cession ofaction could not be forced upon an unwilling creditor. I think the twopassages may be reconciled upon this view. But even accepting the lawas laid down bj Pothier as applicable to this case, it is clear that the tenderof payment in this case was not- made in the name of the debtor. Theplaintiff has all along in the proceedings insisted on his right as subse-quent mortgagee to pay off the debt. In his plaint (paragraph 6) heasserted that he acted as~agent for the debtor but he withdrew from thisposition in the course of the proceedings, and he has nowhere assertedthat he made the tender in the name of the debtor. I may add that ifin fact the plaintiff claimed cession of action, his offer should be dis-regarded, for there would be no advantage to the debtor, in that the onlyresult would be a change ~of creditor. But counsel for the plaintiffhas stated that he does not claim cession of action, and the plaintiff hasnot asked for it in the prayer of his plaint.
In my opinion the various authorities establish the followingpropositions': —
It- is open to any person who has an interest in the payment to offerto the prior mortgagee the amount of the debt without the consent and evenin opposition to the orders of the debtor. The prior mortgagecan be compelled to accept the offer. In the case of a valid offer therewill be an end of any action brought by the prior mortgagee, and theaccumulation of interest will be stopped and the right of hypothecation-extinguished. But for the offer to be valid it must be made in thename of the debtor and the offer will not be regarded if there is noadvantage to the debtor for example if all that results is a change ofcreditor. (Vide Pothier 3.1.1. and Voet 20.4.34.)
The person who makes the offer and compels its acceptance willnot obtain the cession of action nor the right to: any preference in thepledge, but any person may by agreement with the prior mortgageeobtain a transfer of the latter’s rights,, provided the transfer is madeaccording to the form permitted by law. (Vide Voet 20.4.35.)
Where the prior mortgagee has brought action, or has taken steps
to enforce his rights, .the position is different.(Vide Voet 20.4.5.)
In the present case the prior mortgagee (the defendant) has not takensteps to enforce his rights. The plaintiff has made his offer tto pay the
1B0
KEUNEMAN J.—Austin de Mel and Kodagoda.
amount of the debt but he has not done so in the name of the debtor,but in his own right as subsequent mortgagee. His action mu6t thereforefail.
The appeal is dismissed with costs.
Jayetileke J.—I agree.
Bose J.—I agree.
Appeal dismissed.