KEUNEAIAN J.— Velupillai and de Silva. ,
1944Present: Keuneman and Cannon JJ.
VELUPILLAI, Appellant, and DE SILVA et al., Respondents.
39—D. C. Galle, 63.
Mortgage decree—Sale of property—Surplus proceeds after satisfaction ojdecree—Claim by unregistered transferee of property and by creditor ojmortgagor—Claims of transferee preferred.
In execution of a mortgage decree the mortgaged property was sold,and after satisfaction of the mortgage in suit, the surplus proceeds wereclaimed, on the one hand, by a transferee of the mortgaged property,whose transfer was not registered and who was therefore not a partyto the mortgage action, and on the other by a creditor of the mortgagor,who seized the surplus in execution of a money decree,—
Held, that the transferee was entitled to the surplus proceeds.
A PPEAJLi from a judgment of the District Judge of Galle.
H. V. Perera, K.C. (with him G. Thomas), for judgment-creditor,appellant.
E. B. TVikremanayake for first respondent, claimant.
Cur. adv. vult. .
November 17, 1944. Keuneman J.—
This is an action on a mortgage bond brought by the plaintiff againstthe defendant, neither of whom is concerned with the present appeal.Decree was entered in this case on February 9, 1943, for Rs. 3,112.50.The property mortgaged was sold and realised over Rs. 6,000, and afterthe plaintifE was paid off a surplus of over Rs. 2,500 remained in the case.The present conflict is between the first respondent and the appellant.The first respondent claimed the surplus on the ground that the defendanthad transferred the property mortgaged to her by deed before the insti-tution of the mortgage action. The deed was not registered, and thefirst respondent was accordingly not a necessary party to the mortgageaction but was bound by the mortgage decree under section 6 (2) and (3)of the Mortgage Ordinance, Cap. 74. The first respondent claimed to beentitled to the surplus remaining after the plaintiff’s decree was satisfied.
The appellant held a money decree against the defendant, and seizedthe surplus lying in Court as belonging to the defendant, and claimedthat the surplus should be paid to him in satisfaction of his decree.
K.EXXNEMAN J.—Velupillai and de SUva.
The short point in the appeal is whether the first respondent who hadtitle to the mortgaged property can claim title to the surplus remainingin the mortgage action after the sale. Mr. H. V. Per era concedes that-had the first respondent been a party to the action before decree she would,have been entitled to claim the surplus, but argues that as the firstrespondent was no party to the action before decree she is not entitledto claim.the surplus. I do not agree with this distinction.
Even if the first respondent had been a party to the decree, there?would have been nothing in the mortgage decree establishing a rightin the first respondent to the surplus. The mortgage decree wouldhave established the right of the plaintiff only, viz., to the hypothecationand the order for the sale of the mortgaged property. Whatever rightthe first respondent had would have arisen from the fact that she hadtitle to the mortgaged property before the sale.
Mr. Wikremanayake draws our attention to section 6(3) of the
Mortgage Ordinance, under which a person who is not a neeessary partyunder section 6 (2) is bound by evex-y order decree and sale or thing donein the mortgage action “ as if he had been a party to the action ” but-he may be permitted to intervene at any stage of the proceedings beforedistribution of the proceeds of sale on such terms as to the Court mayseem just. Under section 6 (4) nothing in the section shall affect anyright to participate in the surplus proceeds of the sale which remainafter the satisfaction of the mortgage in suit, or to follow suchproceeds.
It is clear in this ease that the first respondent was bound by the-decree and sale “ as if she had been a party to the action ”. She has clearlybeen permitted to intervene in the action before the distribution of the-proceeds of sale was completed. The decree has now been fully satisfied^and there are no outstanding claims by the plaintiff. I can see nothingthat can px-event the first respondent from claiming that in virtue of heroriginal title to the mortgaged property she is entitled to the surplusremaining from the sale of the property. Her claim is superior to that ofthe appellant, who is the holder of a mere money decree against thedefendant and has no claim against the first respondent.
If Mr. Perera’s argument is sound, then had the conflict been betweenthe first respondent and the defendant who had transferred the propertyto her, we should have been compelled to hold that the claim to thesurplus by the defendant was superior to that of the first respondent-I do not think that proposition can be entertained.
The appeal is dismissed with costs.
Cannon J.—I agree.
VELUPILLAI , Appellant, and DE SILVA et al., Respondent