SILVA v. MUDALIHAMY

108-NLR-NLR-V-17-SILVA-v.-MUDALIHAMY.pdf


( 828 )
[Full Bench.]
Present : Lascelles C.J., Ennis J., and De Sampayo A.J.
SILVA v. MUDALIHAMY.
131—D. C. Kandy, 22,230.
Mortgage of a land by person having only a usufructuary mortgage—Saleof mortgagor's right—Purchase by owner of land—flight* of secondmortgagee—Procedure for seizure and sale of mortgage debt—CivilProcedure Code, ss. 229, 266, 286.
Plaintiff in D. C. 31,0X4 obtained declaration of title to thelands in dispute subject to first defendant’s rights to remain inpossession until be was paid the sum of Bs. 600 due on a usufruc-tuary mortgage bond (No. 9,798) executed by second defendant(original owner) in favour of first defendant.
Subsequently, in January, 1912, the first defendant executed amortgage bond (D 1) in favour of third defendant for Bs. 409, bywhich he mortgaged all his right, title, and interest to the lands indispute as a first and primary mortgage; the third defendant putthe bond in suit in D. C. 21,889, to which the plaintiff was no party;and the third defendant purchased the lands at a Fiscal's sale inAugust, 1913.
Under a writ against the first defendant in D. C. 20,584, bondNo. 9,793 was sold and pnrchased by the plaintiff, who obtained acertificate of sale dated June 17, 1912,—
Held (per LascellesC.J. andDe Sampato A.J.,dissentiente,
Ennis J.), that the first defendant's right to the lands as usufructuary■ mortgage was extinguished by merger by the purchase of thebond No. 9,793 by the plaintiff, and that the third defendant hadthereafter no right to the lands.,
Ennis J.—The third defendant is entitled to retain possessionuntil the amount of the first defendant's debt to her is paid off.
Db Sampato A.J.—“ 'Where a person mortgages lands which donot belong to him, butofwhichhe has himself onlya mortgage,
does his mortgage interestlegallybecome security forhis debt in
the hands of his own mortgagee ? I do not think so, at all eventsnot so as to affect a third party who subsequently acquires a
mortgage interest D 1is a mortgage pureand simple,
and even assuming that the mortgage of the iands included in lawa mortgage of the first defendant's usufructuary rights, the thirddefendant, in order to assert a right to possession, must previouslyrealize that mortgage; that is to say, he must have the usufructuarymortgagee's interest sold in execution and an assignment executedin his own favour."
Where an interest of a mortgagee of land is sought to be sold inexecution, the mortgage bond should be seized as a debt (i.e., as amovable) under section 229 of the Civil Procedure Code, and therest of the execution proceedings culminating in the transfer shouldlikewise follow the procedure and forms laid down for the sale ofmovables.
( 329 )
T
HE facts are set out as follows in theAd-
judgment of De Sampayo
This appeal concerns two lands, which originally belonged tosecond defendant, against whom they were sold in execution inSeptember, 1907, and were purchased by one Nicholas Fernando.They were again sold in execution against Nicholas Fernando, andpurchased by the first plaintiff in January, 1911. In D. C. Kandy,21,014, the first plaintiff in May, 1911, sued the first defendant inejectment and obtained a decree declaring him entitled to the lands,but subject to the first defendant’s right to possess the same byvirtue of a usufructuary mortgage effected by the second defendantin favour of the first defendant by bond dated March 31, 1906, forsecuring the payment of Bs. 600. Subsequently, under a writ issuedagainst the first defendant, the debt due to him on this bond, and allhis right and interest as usufructuary mortgagee, were sold by theFiscal in 1912 and were purchased the plaintiffs, and the Fiscalgranted to them a certificate of sale dated June 17, 1912. On thefooting that the plaintiffs’ title was thus perfected, the plaintiffs
have brought the present action against the defendants in ejectment,.alleging that since the issue of the certificate of sale in their favourthe defendants have been in wrongful possession of the lands. Thefirst and second defendants had practically no defence to makeexcept a denial of the alleged wrongful possession on their part, butthe third defendant asserted a right to be in possession under thefollowing circumstances. It appears that, pending the above actionNo. 21,024, the first defendant by a bond dated January 29, 1912,purported to mortgage the lands to the third defendant to securethe payment of Bs. 400 with interest thereon at 10 per cent., andthat under a decree entered in D. C. Kandy, No. 21,889, on thisbond the lands were sold by the Fiscal and purchased by the thirddefendant in August, 1913. The District Judge by his decree gavejudgment for the plaintiffs with, right of possession, but declared theplaintiffs' title to be still subject to the rights of the third defendantas mortgagee on the bond of January 29, 1912, in her favour.
The third defendant has appealed from that part of the decreewhich gave possession to the plaintiffs, and the plaintiffs have alsogiven a notice of appeal against the decree in so far as it declaredtheir title to be subject to the rights of the third defendant asmortgagee under the bond of January 29, 1912.
A. St. V. Jayewardene, for the third defendant, appellant.—Thethird defendant need not have made the plaintiffs parties to hisaction on D 1, as the plaintiffs were not in possession of the landswhen the action was brought. (See 26—D. C. Matara, 4,77s1).
The certificate of sale (P 5), which purports to convey the firstdefendant’s interests in the bond No. 9,793 to the plaintiffs, is1 S. C. Civil Mina.. June 20,1912.
1914.
SUtiav.
Mudolihamy
( 330 )
1M4.
Silvav.
Mu&ctiihamy
ineffectual to transfer the mortgagee’s rights to plaintiffs. The rightsof a mortgagee are immovable property. The bond should havebeen seized and sold as immovable property. Counsel citedVanderstraaten’s Reports 241; Van Lieeuwen's Commentaries^ vol.
pp. 144 and 145; Marimuttu v. De Soysa;1 Suppramaniam v.Naganatha.2
The. procedure for the sale of immovable property is laid down insection 237 of the Civil Procedure Code. The conveyance shouldhave been executed as directed by section 286.
The money paid by the third defendant on D 1 went to pay offprior incumbrances effected by the first defendant. The thirddefendant is entitled to a jus retentionis until the plaintiffs paid theamount of those incumbrances. (1 N. L.m R. 228, 3 Bal. 248.)
V
Bau>a% K.C., for the plaintiffs, respondents.—The procedureadopted for the seizure and sale of the mortgagee’s rights is regular,and P 6 conveyed the first defendant’s rights to the plaintiffs.Mortgage debt is not to be considered immovable property. (2Maas. 4t Salohamy v. Weerasekera, 3 Basian Pillai v. Anapillai.4)The fact that plaintiffs bought the mortgagee’s rights at a Fiscal’ssale should not make any difference. If the plaintiffs had paid themortgage debt to the first defendant, they would be in a position toignore the third defendant, who had only a precarious security.
[Ennis J.—You should not stand in a better position than a thirdparty, who might have purchased the first defendant’s rights.]
The plaintiffs are in the same position. If a third party bought themortgagee’s rights, he can only recover Rs. 600 from the plaintiffs.The payment of that sum would have extinguished the right ofthe usufructuary mortgagee. The same result is attained here bymerger. The only interest the first defendant had to the land isthat of a usufructuary mortgagee, and the right is accessory to thedebt. This right vanishes the moment the debt is extinguished.
The bond in favour of the third defendant was not registeredwithin fourteen days, and is therefore invalid.
The first defendant has mortgaged the lands themselves to thethird defendant on the footing that he was the owner. There isno reference in D 1 to a mortgage of his rights as mortgagee.
Jayewardene, in reply.—The effect of D 1 is to give the thirddefendant a right to recover the debt. D 1 is tantamount to anassignment of the rights of first defendant to third defendant. If amortgage right of land is movable property, P 5 should have beenregistered within fourteen days. It is otherwise invalid.
Cur.- adv. vult.
1 1C. L. n. 32.3 {1908) 11 N. L. R. 36.
*7 S.C. C. 105.4 {1901) 5 N. L. R. 165.
( 381 )
June 29, 1914. Lascelles C.J.—
The re-argument before the Full Court has satisfied me that sticavthe position taken up by the plaintiff in his statement bf objections MudaKhamyrepresents the true rights of the parties.
For the purposes of this action, the plaintiff’s title "to the landsin dispute may be taken to begin with the decree of this Court inaction No. 21,014, declaring the plaintiff entitled to these landssubject to the first defendant’s rights to remain in possession untilhe was paid the sum of Bs. 600 due on a usufructuary mortgagebond No. 9,793 executed by the second defendant in favour of thefirst defendant.
Then, in January, 1912, the first defendant executed the mortgagebond D 1 (No. 2,649 dated January 29, 1912) in favour of the thirddefendant (his wife) for Bs. 400. This bond is in the ordinary form.
After reciting a loan of Bs. 400 by the third defendant to the firstdefendant, it purports to “ mortgage and hypothecate to and with ”the third defendant “ all my right, title, and interest as a first orprimary mortgage until the payment of the principal and interest ”to the lands now in question and another land. The bond alsocontains a declaration in .the following terms:“ That as 1 had the
legal right to the above lands, I have mortgaged the same underthis bond.”
The decision of this case turns upon the effect of this document.
The only interest which the first defendant had in the property noyin dispute was his interest in the usufructuary mortgage No. 9)793.
He was entitled to possess the property only so long as the Bs. 600due under the usufructuary mortgage was a subsisting charge on theproperty. The moment this debt was satisfied the first defendant’srights in the property disappeared. The security for the loan ofBs. 400 which the first defendant gave to his wife was thus of ahighly precarious character. It was in effect no security at all.
Any notary with a proper sense of the responsibilities of his officewould have advised the third defendant not to lend money on sucha security.
Then the third defendant put the mortgage bond D 1 in suit, soldone of the two lands, and bought it herself, receiving the Fiscal’sconveyance D 2. Meanwhile, in District Court No. 20,584, writ wasissued against the first and second defendant, the debt of Bs. 2,000due to the first defendant from the second defendant under, theusufructuary mortgage bond No. 9,793 was seized, sold, and pur-chased by the present plaintiff for Bs. 51. A Fiscal’s certificate wasduly issued assigning the mortgage debt to the two plaintiffs in theusual form. This clearly terminated the first defendant’s interestin the land.
The first defendant was entitled to possess the land , only so longas the Bs. 600 due under the bond No 9,793 remained unpaid.
When the plaintiff bought the entirety of the debt due under the
( 882 )
1914. bond the Be. 600 was no longer due, and the first defendant's right
— to posses* the land was determined.
Usnuas
CvJ. Mr. A. St. V. Jayewardene contended that the deed D 1 must beSUt^av.construedasan assignment of thedebt,so as to place the third
MvdaUhamy defendantinthefirst defendant’sshoesas regards the mortgage
debt. But such a construction is inadmissible. The deed is amortgage bond in the ordinary form, and it is impossible to give ita different effect.
It was also contended that the Fiscal's certificate P 5 was ineffectualto* transfer the mortgage debt to the plaintiffs. Whether a mort-gage debt under the Roman-Dutch law is technically considered asmovable dr immovable property is not very material. The questionis whether the seizure mid sale of the debt is in accordance with theprovisionsoftheCivil ProcedureCode.It cannot, I think, be
contendedthat theseizure and sale of this debt was not in accordance
with section 229 and 255 of the Civil Procedure Code.
For the above reasons I would dismiss the third defendant's appeal,and allow the plaintiff-respondent's objection by deleting from thedecree 60 much as orders and decrees that the land decreed to theplaintiff is subject to the rights of the third defendant on her mort-gage bond No. 2,649 of January 29, 1912. The third defendant,I think, should pay the costs of the appeal, and the order as to costsin the District Court should 6tand.
Ennis J.—
The only question in this appeal is the effect of the document D 1.This document was executed on January 29, 1912, and registeredoh March 5, 1912. It purports to mortgage to the third defendantall the first defendant's “ right, title, and interest " in certain land.The first defendant held a usufructuary mortgage on the land fromthe second defendant, and he had the right to possess the'land tillhis mortgage was paid. The plaintiff is the successor in title to theeeoond defendant. In District Court No. 21,014, between theplaintiff and first defendant, the plaintiff was declared entitled tothe land subject to the usufructuary mortgage of the first defendant.In District Court No. 20,584 the interest of the first defendant in theusufructuary mortgage was seized and sold in execution by the Fiscalon May 21, 1912. The plaintiff was the purchaser, the Fiscal'stransfer was given on June 17, 1912, and it was registered onNovember 18, 1912.
The learned District Judge has, in .my opinion, rightly found thatthe transfer D 1 conveyed to the third defendant the right whichthe first defendant had over the land, but he has held that, inasmuchas the plaintiff had become possessed of the first defendant's rightsbefore the third defendant put the bond D 1 in suit in District CourtNo. 21,889, she could not have sold without making the plaintiff a
( 888 )
party to the action. The plaintiff had notice, by the'* registration ofD 1 oh March 5, 1912, that the first defendant had dealt with hisrights-as a usufructuary'mortgagee before he purchased those rightoat the FiscaTs sale on May 21, 1912, and therefore it seems to methe plaintiff did not acquire anything more by his purchase in May1912, than the first defendant's right to redeem the mortgage. Theonly effect then on the third defendant putting I) 1 in suit in DistrictCourt No. 21,889 without making the plaintiff a party would be toleave intact the plaintiff's right to redeem, and a purchaser at a salein execution would acquire the right of possession subject to theplaintiff's right. The third defendant was the purchaser at theFiscal's sale in that action and all the parties interested are beforethe Court in this action I cannot see any ground whatever fordisturbing the third defendant in her possession of the property, orthat the plaintiff has any right to the possession until the mortgagehas been paid off.
1 would amend the decree by striking out the words “ with rightof possession thereof " after the description of the properties and byeliminating the award of. damages.
I would allow the appellant costs on appeal.
After the above was written this case was referred to a Full Court,and at the re-hearing it was urged that the plaintiff by his purchaseat the Fiscal's sale and the. subsequent transfer of the debt to himhad merged the debt, and that he was entitled to the possession ofthe land as if he had paid the debt. The argument is that the thirddefendant's deed D 1 does not operate as a transfer of the debt toher; that it is operative only as a conveyance of the right of possessionof the land until first defendant's debt was paid by plaintiff. D 1purports to be a conveyance of all the first defendant's “ right, title,and interest in the land on mortgage as if the first defendant werethe owner. In the case of Marimuttu v. De Soysa 1 the Privy Councilfound that one Tambayah was the owner of the estate to the extentthat he could properly remain in possession of it until he was paidthe amount which was due (the position of the first defendant in thiscase before his transfer to the third). Tambayah took certainproceedings to which the owner of the land was not a party, andunder which sales of the estate were made. The defendant in thatcase subsequently became the purchaser under a Fiscal’s sale. ThePrivy Council, assuming for the purpose of the decision of the casethat the plaintiff was not bound to recognize the sale to the defendantand he was not a party to Tambayah's proceedings, held that theeffect must be to replace Tambayah in the position which Tambayah
held…-.as mortgagee in possession. He would be in lawful
possession of the estate until he is .paid the money due to him
11 C. L. R. 32.
i*U.
Emds J.
SUvatf.
Mudatihamy
( 384 ).
1914.
Banns J.
Sihav.
MuMihamy
The plaintiff now asks to be declared the owner of the
estate, that the defendant be declared not entitled and
be ejected therefrom. Not a single word about payment of
the mortgage which is due either to Tambayah or to the defendant.What the plaintiff desires in his plaint is to get into possession
without any payment at all. That seems to their Lordships
to be a glaring injustice towards the defendant, who has honestlypaid for his estate and is entitled at least to all that Tambayahhimself could claim.' '
In that case the defendant held a transfer of the land not anassignment of the debt, and yet the equities between Tambayah andthe defendant were regarded. The cas.e, however, differs from thepresent one, in that there the plaintiff had done nothing towards theliquidation of the debt, while here the plaintiff has made a purchaseof the debt at a Fiscal's sale. Morgappa Ghetty t>. Holloway 1 is areverse case, where the equities between a mortgagee and hisassignee were regarded.
It is conceded that if D 1 had been an assignment of the debt,.-tirepurchase at the Fiscal's sale would have given the plaintiff nothing.
At the time of the sale.the third defendant’s deed D 1 had beenregistered, and the plaintiff must be taken to have known of thetransaction, as he should have searched the registers. It seems to 1me he must be held to have purchased the first defendant's right tobe paid the debt subject to the equities between the first and thirddefendant, and the third defendant under her deed was entitled /tostand in the shoes of the first defendant, at least to the amount of themortgage to her. The first defendant's interest in the land wasthat of a usufructuary mortgagee, and between him and the thirddefendant he must be deemed to have dealt with that right as ifthe proper form of conveyance had been used (on the principle thatthe conveyance of the greater interest includes the conveyance ofthe lesser interest). Any one buying the' first defendant’s interestunder his mortgage after the registration of the first defendant’sdeed of transfer (D 1) could not place himself in a better position,as against the third defendant, than the first defendant held.
The third defendant has honestly paid for her estate, and is, in myopinion, entitled to retain possession until the amount of the firstdefendant's debt to her is paid off.
De Sampayo A.J.—
His Lordship stated the facts, and continued:—
The appeal of the third defendant is principally based on theargument that the first defendant's right of possession under theoriginal usufructuary mortgage effected by the second defendant in1906 passed to the third defendant by virtue of the first defendant's
>2 8. C. C. m.
( )
mortgage of January 29, 1912, in her own favour. Itrthe first place,it is to be observed that the latter bond did not grant a mortgage ofthe first defendant’s interests as mortgagee under the old bond of1906, but purported to mortgage the lands themselves, to which infact proprietary title was recited a6 being vested in the first defend-ant by virtue of a deed of transfer No. 9;199 dated July 25, 1910,and I doubt whether the third defendant acquired thereunder thefirst defendant’s right of possession as usufructuary mortgagee.Usually, no doubt, on the principle that the greater includes the less,the transfer of ownership may have*the effect of transferring a lessorinterest, such as a mere right of possession. But where a personmortgages lands which do not belong to him, but of which he hashimself only a mortgage, does his mortgage interest legally becomesecurity for his debt in the hands of his own mortgagee ? I do notthink so, at all events not so as to affect a third party who subse-quently acquires that mortgage interest. The mortgage of January29, 1912, is not a transfer of the lands,' and herefore not a transferof the first defendant’s right of possession of the lands, and in myopinion it did not in any way have the effect of assigning to thethird defendant such right of possession. It is a mortgage of thelands pure and simple, and even assuming that the mortgage of the' lands included in law a mortgage of the first defendant’s usufructuaryrights, the third defendant, in order to assert a right to possession,must previously realize that mortgage ; that is to say, he must havethe usufructuary mortgagee's interest sold in execution and anassignment executed in his own favour. This in fact he attemptedto do by bringing the action No. 21,889 against the first defendant:n December, 1912, when the plaintiffs had already bought up thefirst defendant’s interest as usufructuary mortgagee. But the thirddefendant cannot depend on his purchase of the lands in pursuanceof his decree in action No„ 21,889, because the plaintiffs were noparties to that action, and because the sale took place and theFiscal’s transfer was obtained by him long after the date of theplaintiffs’ purchase and certificate of sale. The third defendant istherefore obliged to fall back on the mortgage bond itself of January29, 1912, which, however, does not, as I have already said, have theeffect of assigning the first defendant's rights of possession to thethird defendant. I may here not incidentally that this bond, of.January 29, 1912, stipulated to pay interest, and it is impossible toargue that it was intended to transfer at the same time the right ofpossession, which necessarily must be in lieu of interest. In the nextplace, what is the nature of this right of possession, and how far doesit extend ? An accessory obligation like a mortgage subsists onlyso long as the primary obligation, which is the debt, is alive, and ifthe debt is paid', or is otherwise extinguished, the mortgage is ipsofacto extinguished also. Now, assuming for this purpose that bythe mortgage bond of January 29, 1912, the first defendant’s right
1914.
Db 6akpayoA.J.
Silva v.Mudalihamy
1914.
On SampayoA.J.
SUoav.
JMaWkamy
( 886 )
oi po8sesf>ion passed to the third defendant, suoh right could only beprecarious, and was liable to be defeated at any moment by thepayment or other extinction of the debt of Bs. 600 due to the firstdefendant on the usufructuary mortgage. – That debt was extin-guished, so far as the first defendant was concerned, and thereforealso so fur aB the third defendant was concerned, when in June, 1912,the plaintiffs bought up the old bond of 1906 and all the intereststhereby created. For the plaintiffs’ purchase of the debt producedin effect a merger and amounted to its extinction. In my opinionthe third defendant must in the circumstances be taken to have lostany right of possession he may have had previous to June, 1912.
Counsel for the third defendant next attacked the validity ofthe plaintiffs’ purchase of the usufructuary mortgagee’s interest inexecution against, the first defendant in June, 1912. In pursuanceof the sale, the Fiscal issued to the plaintiffs a certificate of sale asprovided by section 279 of the Civil Procedure Code for the case ofsales of movables. It was argued that under the Roman-Dutch law amortgage of immovables is itself an immovable, and that the Fiscalshould have transferred the property by means of a conveyance,under section 286 of the Code, as in the case of a sale of immovableproperty. The dictum jn D. C. Kurunegala, 1,150 (Vand. Rep. 241),to which reference was made, is not of much value on this point, asthe report does not disclose the circumstances under which it waspronounced, nor do I think that, the Roman-Dutch law or anydecision founded thereon quite affords guidance in the interpretationof the provisions of the Civil Procedure Code. I prefer to followthe principle underlying the decisions in Bastian PUlai v. Anapillai1and- Salohamy v. Weerasekera,2 in which it is pointed out that, wherea mortgagee’s interest is sought to be sold in execution, the mortgagebond should be seized as a de^t (i.e., as a movable) under section229 of the Civil Procedure Code, and I should say that the rest ofthe execution proceedings culminating in the transfer should like-1wise follow the procedure and forms laid down for the sale ofmovables. However that may be, all that we are at presentconcerned with is the question whether the debt, apart from themortgage security, was transferred to the plaintiffs, and wassufficiently evidenced by the certificate of sale issued to them by theFiscal. There is no room for doubt on this point, and I am ofopinion that the plaintiffs validity acquired the first defendant’s rightto the sum of money secured by the mortgage of 1906.
It was lastly argued that at all events the'third defendant should!succeed on the ground that the money paid on the first defendant’sbond in favour of the third defendant went to pay off two priorincumbrances effected by the first defendant, and that on thatfooting the third defendant was entitled to jus retentionis until theplaintiffs paid him the amount of those incumbrances. But those,
1 [1901) S N. L. B. 165.
1 (190S) 11 If. L. B. 36.
( 887 )
inoumbrances, not being effected by the original owner? but by thefirst defendant himself, subsequently to the purchase by the plaintiffsof the lands and of the usufructuary mortgage itself (the second ofthem in fact being after the commencement of the present action),ore in no sense prior incumbrances, and do not affect the plaintiffs.I therefore think that the third- defendant has no right of retentionas against the plaintiffs.
As regards the declaration in the decree to which .the plaintiffstake exception, the District Judge has, if I rightly understand thejudgment, proceeded on the footing that the first defendant’s bondof January 29, 1912, had .tire effect of transferring to the thirddefendant the right of possession, and- prevailed over the plaintiffs’certificate of sale by reason of prior registration ; but, as the thirddefendant did not make the plaintiffs parties to the action No. 21,889against first defendant on the mortgage, he considered the plaintiffshave presently the right to possess the lands, though that right mightbe defeated by the third defendant bringing an action to realize themortgage as against the plaintiffs. I do not quite follow the learnedDistrict Judge here. No question of registration arises, because themortgage bond in third defendant’-s favour is prior in date to theplainiaffs’ certificate of sale, and, for the reasons -I have alreadygiven, the third defendant is not in a position to bring any action asagainst the plaintiffs to realize his mortgage.
I think the third defendant’s appeal fails, and the plaintiffs’cross appeal is entitled to succeed. I would accordingly dismiss thethird defendant’s appeal, and delete that part of the decree of theDistrict Court by which the plaintiffs’ title is declared to be subjectro the rights of the third defendant on the mortgage bond of January29, 1912. 'I’lie plaintiffs should have costs of appeal.
Appeal of third defendant dismissed.
Cross-objection of plaintiffs upheld.
♦1914.
De SaupatoA.J.
Silva v.Mudalihamy
27-