V. SIVAPIRAGASAM, Appellant, and S. VELLAIYAN et al., Respondents

083-NLR-NLR-V-55-V.-SIVAPIRAGASAM-Appellant-and-S.-VELLAIYAN-et-al.-Respondents.pdf

298
G-RATIAEN J.—Sivapiragasam, v. VeUaiyan
Present: Gratiaen J. and Gunasekara J.
V. SIVAPIRAGASAM, Appellant, and S. VELLAIYAN et al.,Respondents“
S. C. 328—JD. G. Point Pedro, 3,611L1 “
Thesavalamai—Pre-emption—Effect of partition decree thereon—Mortgagor’a rights as-against pre-emplor..
A co-owner’s right of pre-emption under the Thesavalamai is extinguishedby a decree for partition entered in respect of the common property.Vyramuttu v. Periathamby (1929) 30 N. L. R. 492, overruled.
A co-owner’s right of pre-emption cannot defeat the rights of a bona fidemortgagee for value whose interests had been created before the right ofpre-emption was asserted in a Court of law.
Appear from a judgment of the District Court, Point Pedro.
N.E. Weerasooria, Q.G., with C. Menganathan, for the defendantappellant.°
H. V. Perera, Q.G., with S. Subramaniam, for the plaintiffs respondents.
Cur. adv. vult.
January 26, 1954. Gratiaen J.—
This appeal calls for a decision on issues relating to certain aspects of aco-owner’s rights of pre-emption under the Tesatodkumai, and on thequestion whether, when exercised, they extinguish hypothecary rightsacquired by a third party during the interval between the date of theimpugned sale and the date of purported pre-emption.
A woman named Mathy, her son Sithambaram and her daughter(the 2nd respondent) were admittedly governed by the Tesawalamai.They owned a property in common by right of inheritance from Mathy’shusband Kathiram. On 6th June 1945 Mathy and Sithambaram soldsome of their undivided shares to Letchumipillai who, jointly (with herhusband, mortgaged her interests to the appellant by two notarial bondsdated 2nd July 1945 and 7th October 1945.
On 17th October 1945 Letchumipillai and her husband instituted anaction for the partition of the common property, joining as parties all theco-owners including the 2nd respondent and her husband the 1st re-spondent. The appellant was also added for the protection of his hypothe-cary rights. On 12th December 1947 a final decree for partition wasentered inter partes whereby a divided portion (hereinafter referred toas Lot 3) was allotted to Letchumipillai subject to the mortgages of 1945in favour of the appellant ; a separate portion was allotted to the 2ndrespondent. No appeal was filed against this decree, and its validityhas not been challenged.
GRATIAEN J.—Siavpiragasam v. Vellaiyan
200
On. 5th October 1948 the appellant sued Letchumipillai and her husbandfor the enforcement of the mortgage bonds subject to which she had beendeclared entified to Lot 3. A hypothecary decree was entered in hisfavour on £0th January 1949 ; the property was thereafter duly put upfor judicial ss.le, and on 19th August 1949 the appellant, being the highestbidder, obtained a conveyance of Lot 3.
Under these circumstances, the appellant might well have regardedhis ownerciiip of Lot 3 as unassailable ; he had bought the property at ajudicial sale in execution of the mortgage decree in his favour, and thetitle had at least been strengthened (if not made conclusive) by virtueof the partition decree of 12th December 1947. Nevertheless the re-spondents instituted the present action against him for, inter alia, adeclaration that their title to Lot 3 was superior to his by virtue of aconveyance dated 14th May 1949 executed in their favour in pursuanceof a decree in action No. 2,505 of the District Court of PointPedro.
The basis of the respondents’ claim is that on 24th October 1945, i.e.,during the pendency of the partition action which I have previouslymentioned, they had filed an action against Letchumipillai and herhusband for the enforcement of their right under the Tesawalamai topre-empt the undivided shares of the larger land (including Lot 3) whichMathy and Sithambaram had previously sold to Letchumipillai. On31st July 1947 a decree was entered declaring the respondents entitled,as against Letchumipillai and her husband, to pre-empt these sharesprovided that they paid a sum of Rs. 1,125 as consideration for the“ substituted purchase ” on or before 29th August 1947. This sum waspaid before the appointed date and they obtained on 14th May 1949 aconveyance of the undivided shares in the larger land which had pre-viously been common property. In the meantime, the partition decreepreviously referred to had altered the entire situation.
The learned District Judge, after trial upon certain issues of law,declared the respondents entitled as against the appellant to the entiretyof Lot 3. The present appeal is from this judgment.
Ultimately, the dispute resolves itself into the question whether (andif so, to what extent) the conveyance dated 14th May 1949 in favourof the respondents in the pre-emption action prevails over the conveyancedated 19th August 1949 in favour of the appellant in the hypothecaryaction. The effect of the final decree for partition dated 12th December1947 is, of course, of considerable relevancy to our decision.
With regard to the respondents’ conveyance dated 14th May 1949executed in pursuance of the decree in their favour in the pre-emptionaction, it will at once be observed :'
(a) that the appellant was not a party to that action, and is ■primafacie entitled for this reason to claim that the decree dated 31stJuly 1947, being res inter alios acta, does not affect the hypothe-cary rights which he had acquired before the action wasinstituted ;
300
GRATIAEN J.—Sivapiragasam v. VeXLaiyan
that, by "way of contrast, the respondents "were ■without questionbound by the final decree entered on 12th December 1947 in the■partition action to which they had been joined as parties ; andthat this decree (quite apart from the effect Of section 9 ofthe Partition Ordinance) operates as res adjudicate betweenthe appellant and the respondents in so far as the zppellant’shypothecary rights over Lot 3 on 12th December 1947 wereconcerned.
n.
The effect of a final decree for partition on a co-owner’s earlier right topre-empt an undivided share of another co-owner must now be considered.If a person governed by Tesawatemai proposes to sell his undivided interestsin the common property to a stranger, he must first offer them to hisco-owners at a fair price, and, should he sell his share to a strangerwithout taking that precaution, any co-owner may within a reasonabletime thereafter exercise his right to pre-empt it. (I need not in thiscontext discuss the corresponding rights of heirs or adjacent landowners).The pre-empting co-owner must pay to the stranger either the pricepreviously paid as consideration for the purchase complained of or (ifthat alleged consideration can be proved to be fictitious) a fair marketvalue assessed by the Court. The principle involved is clea” enough. TheTesawalamai recognises the pre-emptor’s right to exclude strangers fromthe intimate relationship of joint ownership within the family or commu-nity ; at the same time it ensures a fair price for the vendor who haschosen to separate himself from the bond of co-ownership ; and, in addi-tion, the purchasing stranger to whose prejudice the right of pre-emptionis exercised is adequately compensated for the loss which he has sufferedthrough his vendor’s fault.
A co-owner’s right of pre-emption is in truth only a right to pay areasonable price in exchange for the privilege of excluding strangersfrom the common property. It cannot logically survive the severanceof the bond of co-ownership itself—e.g., after the common property hasbeen partitioned into separate allotments each of which becomes theexclusive property of an individual member of the former group. Oncethat has taken place, the foundation of any previously acquired right ofpre-emption is automatically destroyed. There is no justification forextending the principle of a customary law beyond the purposes whichit is intended to serve.f
It is pertinent in this connection to quote certain observations ofVoet (18.3.9) on the scope of the jus retractms legalis (i.e., a right createdby law or custom and not by agreement) whereby, in the Rhineland andin Delft, a co-owner’s right to pre-empt shares sold to a stranger wasapparently recognised in former times :—.
c‘ Undoubtedly this right of superseding another who has obtainedthe ownership in a legitimate mode, being a deviation from the commonlaw and contrary also to freedom of contract …. must receive astrict interpretation. ”
C
Customary rights of this nature have been regarded as unsuitable forintroduction into the general law of South Africa and Ceylon.
GRATIAEN J.—Sivapiragasam v. Vellaiyan
301
I am aware that Akbar J., sitting alone, expressed the opinion inVyrcrniuttu v. Periathamby1 that, even after the date of a final decree forpartition, a Tesa walamai co-owner’s right of pre-emption continues toattach to the divided lot which has taken the place of the undivided sharein what was originally common property. In my opinion, Vyramutbu'scase was wrongly decided on this point and should be overruled.
The inter partes decree for partition entered on 12th December 1947effectively extj jguished as from that date the respondents’ right topre-empt the undivided share in the common property which Letchumi-pillai had purchased from the 2nd respondent’s co-owners ; indeed,her title to that share had been wiped out by the decree, and was replacedby a new and unimpeachable title to Lot 3 of which she became theabsolute owner subject only to the appellant’s hypothecary rights whichwere expressly reserved by the decree. Letchumipillai’s title, and theappellant’s hypothecary rights over Lot 3, were protected thereafterfrom the impact of any claims to “ substitution by pre-emption ” by aformer co-owner of Letchumipillai’s vendor. After that date, the re-spondents were divested of their essential qualification to rely on thespecial benefits which they had previously enjoyed under the customarylaw, because they had themselves ceased to be co-owners of the largerland ; they had become instead exclusive owners of an allotment adjacentto Lot 3. And it is clear law that, under the Tesawalamai, an adjacentowner is not entitled to pre-empt his neighbour’s land unless he alsoenjoys hypothecary rights over it—Sabapathy v. Sivaprakasam 2.
There is a further reason for rejecting the respondents’ claim. Theyhad instituted their action for pre-emption after Letchumipillai’s mort-gages in favour of the appellant had been duly registered. In thatsituation no decree in their favour for pre-emption could operate in dero-gation of the appellants’ previously acquired hypothecary rights exceptin an action to which the appellant was made a party—so that he couldhave had an opportunity of challenging the validity of their claim.
A co-owner’s right of pre-emption cannot defeat the rights of a bonaJide mortgagee for value whose interests had come into existence before theright of pre-emption was asserted in a Court of law. Both sets of right canlogically and equitably be reconciled without injustice to either.
In Bodiga v. Nagoor3 this Court held, after consideration of the con-flicting opinions of the jurists upon the point, that, if a sale is set asideon grounds of enormis laesio, the rights of a mortgagee under the purchaserare not extinguished by a decree passed in an action to which he wasnot a party. If, therefore, the title of a purchaser under a sale which isvoidable on the ground of enormis laesio is not regarded in Ceylon as adefeasible title (the extinction of which would automatically destroyhypothecary rights based on it) I do not see why the principles enunciatedin Voet 20.6.8.9 should be applied to a title which is liable to pre-emptionat the instance of a Tesawcdamai co-owner. For, as was held in Karthi-gesu v. Parwpathy4, “the right of pre-emption …. is simply aright of substitution, entitling the pre-emptor …. to stand in the
(1929) 30 N. L. R. 492.2 (lg43 45 N L R j
(1905) 8 N. L. R. 62.* (1945) 46 N. L. R. 162.
302
Sanitary Inspector, Mirigama v. Nadar
shoes of the vendee in respect of all the rights and obligations arising fromthe sale under which he has derived his title. It is, in effect, as if in asale-deed the Vendor’s name was rubbed out and the preremptor’s namesubstituted in its place In such a situation, justice requires that, bythe same fiction, the “ substituted ” purchaser should take over theshare subject to real interests created by the original purchaser beforehe was superseded.
There is no hardship involved in the acceptance of this principle because,in a properly constituted action, the pre-emptor could either be substi-tuted as owner subject to the existing mortgage or take over the propertyunencumbered if he prefers to discharge the mortgage by payment.In either event, the price to be paid to the original purchaser would beproportionately reduced. This solution permits the customary rightsof a Tesawalamiai co-owner to be preserved in all their integrity withoutviolating the sanctity of legitimate commercial transactions which,in a developing society, call for just as much respect.
Certain issues of prior registration were also raised at the trial. Theytoo must be answered in favour of the appellant. The doctrine of lispendens cannot adversely effect the appellant’s ' mortgage because itwas created before the actiqn for pre-emption was inrtituted. If, again,one examines the competition between the decree for partition (on whichthe appellant relies) and the decree for pre-emption (which is the basisof the respondents’ claim), the former clearly prevails because the parti-tion action was duly registered before the pre-emption action had com-menced. Indeed, Mr. Perera very properly conceded that the appealmust succeed unless we accept the argument that, under the decree forpartition, Letchumipillai’s title to Lot 3 continued (as Akbar J. suggested)to be defeasible at the instance of a former pre-empting co-owner of thelarger land. That submission I have respectfully rejected.
Pot all these reasons, I would set aside the judgment under appeal andenter a decree dismissing the respondents’ action with costs both hereand in the court below.
Gtjnasekaba J.—I agree.
Appeal allowed r