( 311 )
VELLAIAPPA CHETTY v. PITCHA MALI LA.
(Alim, Special Mortgagee; Velliappa Chettv and others,Simple Creditor).
C., KurunegaJa, 1,625.
Special mortgage of movables—Preference to proceeds of sale—Effect of section352 of Civil Procedure Code.
Bonseb, C.J.—A special mortgagee of movables is entitled to bepreferred to all other creditors of the debtor in respect of the proceedsof the sale of such movables.
Since the price of the property sold in execution takes the place of theproperty itself, the Court is bound to hand over to the special mortgageeso much of the money as Would cover his claim.
Section 352 of the Civil Procedure Code has not the effect of repealingthe Roman-Dutch Law as to the right of a special mortgagee of movablesto preference in the proceeds of the sale of those movables.
Konamalai v. Sivakolunthu (9 S. C. C. 203), commented upon.
LAINTIFF having sued out writ of execution against thedefendant, certain goods were seized and sold by the Fiscal
as belonging to the defendant, and the Fiscal brought into Courtthe sum of Bs. 1,160, stating at the same time that the goods soldunder plaintiff’s writ were also under seizure under five otherwrits, including writ No. 11,890 of the District Court of Colombo.The Fiscal further reported that the holder of 11,890 claimedpreference over the proceeds of the sale as mortgagee of the goods,while the other writ-holders claimed concurrence.
Plaintiff in case No. 11,890 appeared in Court, alleging that thegoods sold had been specially mortgaged to him, and claimed theproceeds of the sale. Notice of this claim was given to the otherwrit-holders.
The District Judge found that the identity of the goods mort-gaged with the goods sold was not satisfactorily proved, rejectedthe mortgagee’s claim to preference, and allowed him concurrencewith the money decree-holders.
The mortgage-creditor appealed.
Bawa, for appellant.
Domhorst, for respondent.
20th November, 1899, Bonser, C.J.—
In this case, the appellant was the mortgagee of certain movableproperty by a duly registered notarial deed. He obtained judg-ment against the debtor, and various other simple creditors of thedebtor also obtained judgments. The property of the debtor was
November 20.Bouses, C.J.
( 812 )
sold, and amongst it the movable property mortgaged to theappellant and the proceeds of the sale are in the hands of theCourt. The appellant claims to be paid his mortgage debt out ofthe proceeds of the sale of the mortgaged property in preferenceto the ordinary judgment-creditors. The District Judge refusedto allow this to be done, on the ground that the identity of thegoods was not established to his satisfaction.
Mr. Domhorst, who appeared for the respondent, admitted thathe could not support that finding of the District Judge; but hecontended that even assuming that the identity of the goods wasestablished, the result must be the same, and he relied on certaindicta of the judges who decided the case of Konamalai v. Siva-kolunthu (9 8. G. G. 203) as establishing the proposition that theEoman-Dutch Law as to the right of a special mortgagee ofmovables to a preference in the proceeds of the sale of thosemovables was repealed by the provisions of the Civil ProcedureCode.
It is difficult to believe that the Legislature can have intendedto make so startling a revolution in the commercial law as wouldbe effected by mortgagees of movables losing their right to theproceeds of the sale of the mortgaged goods. I should haveexpected that, if that was the intention of the Legislature, it wouldhave expressed it in unmistakable terms and not left it to beinferred from the language of any obscure section in a ProcedureCode. The section which is supposed to have effected this changeis section 352 of the Civil Procedure Code, and I think I am notdoing that section an injustice in saying that it is loosely drawn,for it speaks of the last preceding section when it means the sectionitself. I do not understand the argument of some of the membersof the Court, in the case referred to, that it is impossible to believethat the Legislature intended only to provide for some cases andnot for all, for I find that the Code itself in section 4 contemplatesthe contingency of various matters being left unprovided for, andprovides that in such cases the existing practice is to remain infull force. It seems to me that section 352 does not expressly takeaway the rights of the mortgagee. Those rights must be deter-mined by tbe law as it existed at the date of the passing of theCivil Procedure Code. As to that there is no doubt. Mr.Dornhorst admitted that the law was clear. It seems to me thatsection 352 would be given its legitimate force and effect byreferring it to cases where there is competition between holders ofordinary money decrees. The proviso at the end of the sectionseems to me to manifest the intention of the Legislature not tointerfere with the rights of mortgagees, and I must say I fail to
( 313 )
see on what principle the mortgagee can be deprived of his rightto the proceeds of the movables hypothecated to him. The lawis clear that, when property is sold by a Fiscal, the purchase moneytakes the place of the things sold. Why should the fact that theCourt has sold property and converted it into money deprive themortgagee of his rights? It is an old maxim that the act of theCourt injures no one. It seems to me that if, whilst the money isin the possession of the Court, the mortgagee comes forward andestablishes that he had a mortgage over the goods which thatmoney represented, the Court is bound to hand over to him somuch of the money as would cover his claim. The section pro-vides that, if the money is paid to the wrong person, the personentitled may sue and jompel a refund. Surely the Court is not tocommit the roundabout injustice of deliberately paying money toa person not entitled to it and referring the person entitled to hisright of action.
I am therefore of opinion that the mortgagee in this case isentitled to be paid his mortgage claim out of the proceeds of thesale of the hypothecated property.
In my opinion, too, this appeal succeeds. In the first place,it is clear by Roman-Dutch Law that the appellant’s securityis a special hypothec.
The statement of the law will be found in Voet (XX. 1.2: Taburna obligata, si dominus tabemw merces inde pertempora distraxent et alias comparaverit, omnia quce posteain ea tabema deprehenduntur, pignori esse creduntur. As suchspecial mortgagee the appellant has a right to be preferred toall the creditors of his judgment-debtor. He has a right to takefrom the proceeds, before it is distributed to them, so much aswill satisfy his specially secured debt.
If that right has not been taken away by the Civil ProcedureCode, it ought to be sustained.
Now, section 352 of the Civil Procedure Code has been pointedout to us as showing that a special mortgagee is not entitled to thepreference which he enjoyed before the Code; but I adhere to theview expressed by me in 3 C. L. R., 37. That judgment pointedout that sections 232 and 352 taken together indicate the intentionof the Legislature to preserve the preferential fights of specialmortgagees. But if I pressed a fuller meaning into those sectionsthan they can be found to contain, then I rely on the provisionsof the 4th section of the Civil Procedure Code, which says that
November 20.Bonsbb, C.J.
( 314 )
November SO.tVlTHEBS, J. where no provision is made by this Code the procedure andpractice hitherto in force shall be followed.
Then Mr. Dornhorst pointed out that the appellant had notgot a special mortgage decree in this case. I have read the decree,and it purports to be in accordance with section 201 of the CivilProcedure Code. The District Judge has followed the form inthe schedule adapted to that section.
If section 201 is intended to apply to hypothecary actions (andthe practice of the Courts is so to apply it), I venture to thinkthat it would be well to include in the judgment in such an actiona declaration that the property is specially bound and executablefor the particular debt.
VELLAIAPPA CHETTY v. PITCHA MAULA