COURT OF APPEALWEERASURIYA, J.
CA NO. 320/93(F)
DC PANADURA 2504/SPL19th AUGUST 199903rd SEPTEMBER 199913rd OCTOBER 1999
Usufructuary Mortgage ■ Discharge – Prescription – Prescription OrdinanceS. 5 – When could the usufructuary mortgagee claim prescriptive rights?
A usufructuary mortgage being a devise for use and enjoyment ofproperty in lieu of interest – prescription could run only from a breach ofthat condition.
Person who entered property in a subordinate character cannotclaim prescriptive rights till he changes his character by an overt act. Theproof of adverse possession is a condition precedent to the claim forprescriptive rights.
Usufructuary mortgagee is bound to the terms of the Bond itself andhis rights are confined to the terms in the bond. He cannot claimprescriptive rights till he changes his character and claim adverselydisregarding the conditions of the Bond. There is no question of mergerof the entirety of the rights and no prescriptive rights being acquired bythe Mortgagee by adverse possession.
APPEAL from the Judgment of the District Court of Panadura.
Cases referred to :
Robert v. Silva 24 NLR 158 at 159
Jayasinghe Bandara v. Elias Appuhamy 12 NLR 300
Government Agent Western Province v. Fredrick Perera 11 NLR 337
Valliappa Chettiar v. J. Vanderpoorten 52 NLR 108 at 114
Velupillai v. Kandiah 27 NLR 89
Sri Lanka Law Reports
12000] 3 Sri LR.
Hemasiri Wiihanachchi with S.N. Vyithsingh for l51 Plaintiff-Appellant.Defendant-Respondent absent and unrepresented.
Cur. adv. vult.
October 13, 1999.
WEERASURIYA, J.The Plaintiff-Appellants by their plaint dated 18.09. 1989instituted action against the Defendant-Respondents seekingan order on the Defendant-Respondents to dischargeusufructuary mortgage bond bearing No. 8505 dated 28. 01.1921 and in the event of their failure for an order on theRegistrar to effect such discharge of the bond and damages.The Defendant-Respondents in their answer whilst denyingaverments in the plaint prayed for dismissal of the action.
This case proceeded to trial on thirteen issues and thelearned District Judge at the conclusion of the trial by hisjudgment dated 07. 07. 1993 dismissed the action with costs.It is from the aforesaid judgment that this appeal has beenlodged.
At the hearing of this appeal, learned Counsel appearingfor the Plaintiff-Appellants contended that the learned DistrictJudge had misdirected himself by holding:
that action was prescribed in terms of Section 5 ofthe Prescription Ordinance and
that the Defendant-Respondents had acquiredprescriptive rights to the property in suit.
The learned District Judge in his judgment had held thatin terms of Section 5 of the Prescription Ordinance, themortgagor should redeem the bond before expiry of ten yearsfrom the date of such instrument. Section 5 of the PrescriptionOrdinance stipulates that no action is maintainable for therecovery of any sum due upon any hypothecation or mortgageof any property or upon any bond conditioned for the payment
Seeman u. David (Weerasuriya. J.)
of money unless the same be commenced in the case of aninstrument payable at a definite time, within ten years fromthe expiration of such time and in all other cases within tenyears from the date of such instrument of mortgage orhypothecation or of last payment of interest thereon or of thebreach of the condition.
A usufructuary mortgage being a devise for use andenjoyment of property in lieu of interest, prescription couldrun only from a breach of that condition (Vide Robet v. Silva!11at 159)
Mestiyage Don Remanis Goonetillake by usufructuarymortgage bond bearing No. 8505, mortgaged his undivided1 /2 share of the property morefully described in the scheduleto the plaint in favour of Dona Misi Nona and Don Welenis. DonWelenis died without redeeming the mortgage and Mei Nona bydeed bearing No. 2102 dated 14. 06. 1934 marked 1D1transferred undivided 131/504 shares to Misi Nona and to 1st- 4th Defendant-Respondents.
o, Remanis left as his heirs his wife Mei Nona and the Is' and2nd Plaintiffs, Misi Nona and Baby Nona. Baby Nonadied leaving Violet Goonetillake who got married to the 1stDefendant, David Goonetillake. Misi Nona died leaving Welenisand 1st – 4th Defendants. Therefore, on the death of RemanisGoonetilake his 1/2 share devolved on Mei Nona and his fourchildren. Mei Nona, being the wife, was entitled to 1/2 shareof his interest, namely. 1/4 share of the property. Therefore,Mei Nona by virtue of deed No. 2327 dated 08. 09. 1995 andthe aforesaid devolution from Remanis was entitled to 3/4share of the property in suit. In the circumstances, by deedmarked 1D1 Mei Nona having divested only 131/504 sharesto Misi Nona and the 1st – 4th Defendants, she was left withsubstantial undivided shares which was not subject to theusufructuary mortgage. The question whether in terms of ID 1the usufructuary mortgagee has acquired entirety of rights of
Sri Lanka Lau) Reports
(2000J 3 Sri L.R.
Mei Nona would be relevant on the issue whether there was amerger of proprietary rights with the usufructuary mortgage.
It would appear that Mei Nona having divested 131/504share of the rights was left with substantial rights which werefree of any encumbrance in favour of Welenis and Misi Nona.
It was held in Jayasinghe Bandara v. Elias Appuhamy121that where a mortgagee of immovable property becomesthe owner of the property mortgaged or any share of it, themortgage security is extinguished to that extent but the debtremains.
The learned District Judge had come to the finding thatthe Defendant-Respondents had acquired prescriptive rightsto the entire property on the basis that along with theirpredecessors in title they had possessed the property for aperiod of 70 years. This appears to be an erroneous view.
To claim prescriptive rights the Defendant-Respondentsought to prove adverse and uninterrupted possession for aperiod of over ten years. The Defendant-Respondents and theirpredecessor in title commenced possession of the propertyon the strength of the usufructuary mortgage bond whichauthorised them to possess the property in lieu of interest.Therefore, the possession of the property was subject to theterms of the mortgage bond namely, to possess the propertyand to enjoy the produce in lieu of the interest payable on theamount of money lent to the mortgagor.
It is well settled law that a person who entered property ina subordinate character cannot claim prescriptive rights till hechanges his character by an overt act. He is not entitled to doso by forming a secret intention unaccompanied by an actof ouster. The proof of adverse possession is a conditionprecedent to the claim for prescriptive rights.
In Government Agent Western Province v. Fredrick Perera!31it was held:
Seernan u. David (Weerasuriya, J.)
“that usufructuary mortgagees had acquired title byprescription to the land, inasmuch as after their purchaseat the fiscal’s sale the character of their possessionchanged and thereafter they must be considered to havepossessed ut domini and not qua mortgagees.”
In that case, the usufructuary mortgagees of a landpurchased the same at a sale by the fiscal under subsequentmortgage and claimed to set off the amount due on theirmortgage against the purchase money and possessed the landfor over ten years without obtaining any fiscal’s transfer.
Further, it was observed in Valliappa Chettiar v. J.Vanderpooten(4) at 114 as follows:
. In the first place a mortgagee, like any other holder ofproperty under a deed, is subject to the terms of the deed andhis rights may be enlarged or diminished by its terms. In thesecond place a mortgagee in Ceylon is not subject to all theunderlying conceptions of English law, but is without doubtbound strictly to fulfil the terms of the deed under which heholds.”
Further in case of Velupillai v. Kandiah151 it was held:
“that on the purchase by the mortgagee of the mortgagedland, the mortgage is merged in the ownership and that thequestion of revival of a mortgage can only arise in a case inwhich for some reason a valid merger does not take place.”
Therefore, it would be clear that a usufructuary mortgageeis bound to the terms of the bond itself and his rights areconfined to the terms in the bond. He cannot claim prescriptiverights till he changes his character and claim adverselydisregarding the conditions of the bond. Therefore, there isno question of merger of the entirety of the rights and noprescriptive rights being acquired by the mortgagee by adversepossession.
Sri Lanka Lau) Reports
(2000J 3 Sri L.R.
In the circumstances, we are of the view, that the learnedDistrict Judge had misdirected himself in coming to theconclusion that action is time barred in terms of Section 5of the Prescription Ordinance and that the Defendant-Respondents had acquired prescriptive rights to the entirety ofthe property.
For the foregoing reasons, we set aside the judgment of thelearned District Judge dated 07. 07. 1993 and allow thisappeal without costs.
UDALAGAMA, J. – I agree.